This week’s Danger Zone company owns several well-known liquor, wine, and beer brands. It has grown largely through acquisition, a strategy that has looked good on the surface, but is a sham when it comes to profits.
Recent improvements in revenue and EPS serve as cover for a cash flow black hole. Since 2002, this company has paid over $6 in capital for every incremental dollar of revenue and paid $17 for every incremental dollar of profit. These trends are disturbing to anyone that cares about cash flow.
Stir in some shady acquisition accounting, billions in debt, $726 million in hidden employee stock option liabilities, and aggressive insider selling and it is hard to argue that anyone should own this stock. Accordingly, this week’s Danger Zone stock makes our Most Dangerous stocks list for September.
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André Rouillard contributed to this report.
Disclosure: David Trainer and André Rouillard receive no compensation to write about any specific stock, sector, or theme.