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Author: RGAnthony Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 41634  
Subject: GT Due Diligence Date: 4/17/2004 2:29 PM
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Here is my DD for GT. Again, I used Joseph Piotroski method to get a feel for the company. Here is an article that describes his approach.

http://www.winninginvesting.com/best_busted_stocks.htm

I was lazy and used 2002 and 2001 year-end results as GT has not published FY03 and 4Q03 results. My results on the nine points using MSN financials for my numbers are:

#1--FAILED Positive Net Income for 2002 at $-1.1B
#2--Positive Cash Flow for 2002 at $676M
#3--Earning Quality, e.g., #2 > #1
#4--FAILED Decreasing Debt, 95%(12496/13146) for 2002 > 78%(10648/13512) for 2001
#5--FAILED Increasing Working Capital, 1.28(5226/4071) for 2002 < 1.57(5255/3326) for 2001
#6--Improving Productitivity, 1.053(13850/13146) for 2002 > 1.045(14127/13512) for 2001
#7--FAILED Growing Profitability, -.084 (-1105/13146) for 2002 < -.015 (-203/13512) for 2001
#8--FAILED Issuing Stock, 175M in 2002 > 163M in 2001
#9--FAILED Competitive Position, 22.4% (876/3906) in 3Q2003 < 22.7% (3138/13850) for FY2002

So, GT passed on 3 of the 9 criteria. Per the article, five points are a passing grade, and the higher the better.

Other concerns with GT are:
. 6-years the price has been dropping
. Current investigation into accounting practices
. Delays in filing of 2003 annual report

I know this is personal for BMW and I do understand. I have always drove GM Cars. However, this looks like a company that may go belly up. I am going to pass on GT for the time. If the price would go to $2 or $3 then I would have to reconsider the risk/reward equation.

Comments are welcome.

Cheers, RGA
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