I always wanted to write about this.Last year, I only shared with my working colleagues. Now,I only hope my late coming analysis can reach out to like minded investors out there… Fortune tellers talk about palm patterns while technical analysts talk about chart patterns,even though I am also a believer of pattern reading, I am more into reading the fundamental patterns of a company when it comes to investing. Some companies have the traits that do not bode well for long term investors.
Let’s get right to it, here are the 3 main patterns as an observer
Given its market cap, Swiber went into significant negative cashflow in FY 2012 and 2013.
There was a sharp increase in long term debt from $581.129 million in FY 2013 to $934.337 million in FY 2014.the higher interest of long term debt usually “eats” into profits of a company in the long haul,that’s why usually short term debts are considered first before long term ones.
The biggest piece of missing puzzle was where can you find a business that made $29.851 million in FY 2014 and yet had the financial capacity to borrow up to over $366 million from banks on the same year? Here we have it right before us.We can’t always rely on the due dilligence by banks on their credit analysis on conpanies they lent to,can we? Or we can choose do a quick simple number analysis like this one.
So when economy downturn affects any business,it hurts cyclical companies such as this in a big way. Be it bond or stock investors out there just be sure to watch out, better learn when to say No and walk away from certain unsound investments in future because all investments are not created disasterous equal. the increase in long term debt previously and its eventual collpase meant that the company used borrowings to meet its daily business obligation. Throwing the good money after the bad usually have disasterous consequences and time will tell.