Here is our free report on DSCM for Ask Matt readers.
Drugstore.com (DSCM) gets a Dangerous Rating because of these RED FLAGs:
- Very Expensive valuation: current stock price implies the company will grow revenues at 20% compounded annually for the next 15 years while also improving ROIC from –2.3% to 10.9% within the same time frame.
- Off Balance-Sheet debt: of $15mm or 15% of Net Assets
- Asset-write-offs: $210mm or 206% of Net Assets
The last Red Flag is particularly disturbing b/c it means that management has written off more than $2 for every $1 of assets on the company’s balance sheet since 2001.All the details are in our free report on DSCM. For the asset write-offs and their impact on economic earnings see Appendix 3 in our report. Our Risk/Reward rating is on page 1.
See Appendix 4 to learn how we calculate NOPAT and NOPAT Margin for DSCM. See Appendix 5 for details on DSCM’s Invested Capital. Appendix 7 (in the Return on Invested Capital section) shows how a negative NOPAT Margin and terribly low Invested Capital Turns result in a negative ROIC — during the last fiscal year.