Dex One Corp (NYSE:DEXO)

CAPS Rating: 1 out of 5

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2
Player Avatar BuffettJunior1 (97.58) Submitted: 11/30/2011 12:48:30 AM : Underperform Start Price: $1.92 DEXO Score: +38.05

This is a very risky investment. This is one of those rare stocks that will either make you a lot of money or leave you with a big tax write off. There is no in-between with this stock.I personally am betting that this company will go bankrupt and here is why -As you all know, this company has no economic moat. The industry the company operates in is also in an accelerated decline.The company has over 2.2 billion in long-term debt. So far the company has managed to cover its interest expense, however, considering the speed at which revenues and free cash flow are declining, I don't know how much longer the company will be able to do this.If revenues decline another 50+ percent as they did last year, the company will not be able to both cover its interest expense and pay down debt. So, in other words, the company is literally in a race against time to save itself from almost certain bankruptcy.If the company does manage to survive it could be one of the best turnarounds in a long time. Investors could easily make 5, 10 times their original investment or more. However, I believe this is very unlikely. I also don't think the company will get bought out considering its outdated business model, and the massive amount of debt on its balance sheet.It will be fun to see what happens with this stock over the next year. I'm betting the company will go bankrupt.

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Member Avatar TSIF (99.96) Submitted: 11/30/2011 2:27:56 PM
Recs: 1

Excellent, pro/con and reason for your downthumb.

These 10X-20X pipers of this one based on EPS are using slight growth and a few even no growth.
What they are missing is the NEGATIVE growth scenerio that is much more likely and deterimental. This one has become a play toy for some and will be the kitchen drain for the followers.

Member Avatar peterod (84.86) Submitted: 11/30/2011 4:24:19 PM
Recs: 1

First off, the company revenue did not decline that severely and the difference in the number you see on Google finance between 2010 and 2009 is largely due to an accounting change. Yes there revenues did drop but part of this is also explained by the cyclical nature of the biz. The company has also brought in new executives who have backgrounds in programing and transforming Pearson publishing into an online publisher. The company now offers products that others are selling but they still have the phone book which is valuable to some small biz owners like lawyers, accountants etc. which still have not all fully transitioned to online advertising. Will the phone book disappear eventually but for now is bringing in a boat load of cash and combined with all the new product offerings should provide value for someone looking for a one stop shop marketing solution. (a temporary advantage if you will - enough to knock out some debt)
Now about the debt - the company is trying to work with lenders as we speak to be able to purchase that debt in the open market which is trading at a steep discount. Free cash flow has leveled off and should be about the same as the company is expecting sales decline to slow in the near future. In conclusion there are many other companies in this space which will surely go BK in my opinion including super media but this company has the best metrics of any in this space by far in addition to having a turnaround team and a plan that makes sense. No doubt that this stock is risky but as long as I'm compensated for it I have no problems with taking risk on.....at $1 to $2 a share this stock is a tremendous bargain bar none.

Member Avatar TSIF (99.96) Submitted: 11/30/2011 4:54:24 PM
Recs: 1

peterod, all good prospective and listed in the 10x-20x article writers that have appeared out of nowhere recently. The bargain was when this was $0.60, not at $1.90 after the article writers touted it. Why did they write those catchy articles? Why did the 10x-20x people suddenly start appearing on the message board.

Both Buffet and I agree there is some possibility here, but don't buy into it after it's been inflated. Don't just listen to the points made by the "inflators". There is a distinct chance they will keep losing money and the debt holders will be less likely to cave in. The other point the "inflaters" make is that this use to be $30 stock less than two years ago. That point, in particular seems to cloud speculators ability and do enough homework to see that they sold off divisions and overpaid for acquisitions.

Good luck if you speculate here. Looks like their is some balance in the points and speculators have some thoughts to take into their own DD.

Member Avatar peterod (84.86) Submitted: 11/30/2011 10:42:13 PM
Recs: 0

well something seems off here from my point of veiw.... we have a stock that earlier this year was trading around 8.....not a whole lot of new info since then other than things have improved for the company albeit minimally if you wish....the stock is now@1.40??? I just think may be possible that the market has extended itself on the downside and has got this one wrong for now to say the least whether or not the company turns around......

Member Avatar TSIF (99.96) Submitted: 12/1/2011 10:14:33 AM
Recs: 1

Hi Peterod,

The company has lost or written off $10.88 the last year. Sometimes writeoffs are not as deterimental to the bottomline as the market assigns. Overall, however, the analogy that it was trading around $8 is the same logic used by others who say it was trading around $30 two years ago. One issue with that type of logic, besides what has/hasn't changed over the time period, is the assumption that the market had it right priced at the higher price in the past.

All in all, I'm all for having a speculator stock in your portfolio if it's done with eyes wide open in a limited dollar play that you've mentally written most of off before you make it. One that has been pumped, however, with excess inflation built in would not be my type of spec play until it cools back off ,but to each his own.

Good luck.

Member Avatar peterod (84.86) Submitted: 12/1/2011 11:56:36 AM
Recs: 1

Agreed.... It's always best to wait for a pullback with these things and keep them in a diversified portfolio...nobody knows the future and it may even hit a new low from here... best!

Member Avatar BuffettJunior1 (97.58) Submitted: 12/1/2011 8:58:24 PM
Recs: 2

Peterod,

I strongly suggest that you read a book called "Common Stocks and Uncommon Profits." It was written by Philip Fisher, and is easily one of the best investment books ever written. It will teach you that a stocks past price should be ignored because its meaningless. Just because a stock used to trade at 50 per share and today it trades at 5 per share, this does not mean its undervalued. This also does not mean that the stock will ever go back to its old trading price. What you should focus on is the fundamentals of the business. Only buy if the stock is trading at a large discount to its intrinsic value.

Member Avatar peterod (84.86) Submitted: 12/2/2011 11:12:14 AM
Recs: 1

sure...my point was that the fundamentals are the same if not stronger today and the stock price is lower... of course valuation is subjective, particularly in this case. The cash flow here is valuable, it just a just a matter of belief whether or not you think they will continue is the main question....if you think that they will, then the company is worth a lot, if not then maybe 50 cents is to high a price.

Member Avatar TSIF (99.96) Submitted: 12/2/2011 12:37:23 PM
Recs: 1

It sounds like you are on the right track Peterod, I guess Buffet and I were just confused by your own pitch on DEXO.
Pitch by: peterod 11/03/11 12:04 PM "Going to $50 over the next 3 years or so.....the best turnaround play in the advertising market."

It sounds like you just get enthused about some of your picks which can be a great thing sometimes for encouragement, etc.

It appears that despite your one line pitches that enthusiastic pitches you are hiding quite a bit under that hood of your "car"!! Good call on DEXO at $0.58, but stay on the tracks!!!

Great call on AMR also, looks like it nudged up enough to keep you from the 90% threshhold for the BK charm, but you'll get it eventually, if not AMR certainly something else.

Buffet, thanks for the book pointer. I'm always looking for a few ideas for reference material or to pass along.
TSIF

Member Avatar bradford86 (99.78) Submitted: 1/8/2012 12:59:23 PM
Recs: 0

i like dexo, i own it.

if you like dexo, look at YLO traded on the toronto.

Glen Bradford

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