September 30, 2012
– Comments (6)
This could be considered a pitch for a stock currently ineligible for rating here.
Debt free, PEG below 1, insider ownership above the 5% minimum I prefer. Well below it's high but showing signs of havin bottomed. I like all of that.
So it's a turnaround situation - they've barely made any money over the past 4 years.
My main concern would be whether the $42M cash on their balance sheet actually exists. If so, what is the purpose of hoarding cash?
Looks to me like it is a genuine turnaround. If the bookkeeping was fraudulent insiders would be selling by the bucketload and the insider ownership would have fallen far below it's current 6.8% Might have fallen below 1%.
ATAI's interest on average cash over the last year is 0.8%, but the 3 month deposit rate in China is 2.9%. What's the point of keeping $42M cash for the last 4 years and earning way below market returns?
Either the CFO is bad at his job or they are doing something shady.
D/E, current ratio and quick ratios all look good to me. That outweighs how much interest they're getting on available cash, IMO. Would be nice if they were getting more, but it's not crucial to me.
Checking below market interest income is a common test for fraud.
Notice how many of these companies have plunged 90% and delisted? Most of the cash wasn't there, that's why they reported below market interest income.
On the other hand fear of delisting or bankruptcy may well be part of the reason a given stock plunged. Which is part of why I pay so much attention to insider ownership. If either was a real threat that number would fall far below my preferred 5%.
Insiders probably understand the publicly available data better than non-insiders, and don't have to resort to anything fraudulent to take advantage of the general public's ignorance.