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Danger Zone: Textron, Inc. (TXT)

From non-GAAP accounting to costly acquisitions, it is not difficult for a company to create the illusion of profits. However, eventually reality sets in and the deterioration of a business comes to light. This week’s Danger Zone pick, Textron Inc. (TXT: $42/share), is destroying shareholder value while covering it up with an acquisition that creates the illusion of profits via GAAP net income growth.
by Kyle Guske II, Senior Investment Analyst, MBA
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Danger Zone: Celadon Group (CGI)

Because P/E ratios are dependent upon earnings, which we know can be manipulated, they can be quite misleading. This week’s Danger Zone is a perfect of example of just how misleading those P/E ratios can be. With a P/E ratio less than half that of its industry average, this week’s Danger Zone stock, Celadon Group Inc. (CGI) would appear cheap because of strong EPS when, in fact, its cash flows are in decline and the stock is highly overvalued.
by Kyle Guske II, Senior Investment Analyst, MBA