Bare Escentuals, Inc. Part Three
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Rich Smith over at the Fool concludes this article on Bare Escentuals, Inc. (BARE) with good advice
Let’s see whether the company’s free cash flow story looks similarly attractive — once management gets around to releasing its cash flow statement, that is. Seems to me, Bare just might bear closer examination.
In the following he was spot on that the low PEG is enticing. That is what has me digging deeper. Though I found his comment on risk possibly symptomatic of delusional thinking.
Yet with the stock down 32% in three trading days, an investment in Bare Escentuals today carries much less risk than it did last week. As Somnambulo correctly observes, the P/E is barely peeking into the double digits these days, and against long-term growth estimates in the low 20s, that makes for an awfully enticing PEG ratio.
A price drop does not always decrease the risk! If a low single digit (LSD) stock price is a possibility then the risk remains close to a total loss of your capital. It is too early for me to determine how possible a LSD stock price is for BARE. My gut feeling is it could be possible and should certainly be given a weighting in any analysis.
Still Rich’s final comment was on the money and I will wait for the cash flow document. From the SEC site I see it takes BARE around two weeks from filing the 8K to file the 10-Q.
The opening quote from Buffett is the smartest thing said about investing since Einstein supposedly declared compounding as the the greatest mathematical discovery of all time.
“We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.” — Warren Buffett
However, like all brilliantly simple statement, success comes from wise application, not from blindly applying. BARE is cheap
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