RE:heavy selling this morning, half million shares dumped
Anyone who scrutinizes the latest quarterly results realizes that the company generated free cash flow of some $60,000 during the quarter, the first time they generated free cash. It is a good milestone, but not enough to improve working capital to the point that it can fuel sustainable and strong growth. Access to a credit line is important, but they were in breach of one of the covenants of the old credit line.
Judging by the action of th stock after the earnings release, many in the market no longer believe that this is a high growth, highly profitable company. We shall see, as I believe they are still in the start of the learning process and going forward can improve margins and profits significantly. But at a much slower pace than previously antecipated.
Management's current silence is probably a good thing: better say nothing than promise what you can not deliver, like the 6% margin. And please: no acquisitions before you enhance the profitability of the core busines.