by winston » Thu Feb 18, 2016 1:20 pm
not vested
Stocks to Sell: FireEye Inc (FEYE)
Last but not least, while there’s no doubt cybersecurity is going to be an increasingly important service as the world becomes increasingly digital and increasingly mobile, it’s also becoming increasingly clear the business model FireEye (FEYE) is using to penetrate that market simply isn’t going to work for the long haul.
That business model? Buying growth. That is, the M.O. for FEYE has been spending generously to acquire companies it can integrate into its existing operation.
The tactic has impressively grown the top line, but rather than its habitual losses shrinking as greater scale was found, they’ve held steady right around $134 million per quarter. What’s the point?
That being said, the lack of organic (and cost-effective) growth isn’t even the primary reason FEYE made this list of stocks to sell the next time it musters a little strength. The real red flag is quietly hiding on the balance sheet.
Up until the middle of last year, FireEye had avoided taking on debt to finance acquisitions. That’s changed, though. FireEye is now sitting on $706 million in long-term debt.
Granted, it’s also sitting on $1.17 billion in short-term assets, but at its current pace of losses and acquisitions, that cash and near-cash could be gone soon.
Throw in the fact that total equity continues to deteriorate as time moves on (it’s now down to $1 billion, from $1.25 billion just a year ago), and it becomes obvious the math of the business model just doesn’t make sense.
Source: Investor Place
It's all about "how much you made when you were right" & "how little you lost when you were wrong"