Can you say “death spiral” or even “fraud”?
Grumpy Old Accountants certainly can, and with relish!
Overstock has attracted analyst criticism for years…we just couldn’t resist taking a look ourselves, and the current vitals do not look good.
Inspection of the Overstock 2011 10-K provided ample evidence.
There’s been far too much non-GAAP (non-generally accepted accounting principles i.e. accepted standards with checks and balances) lately, be it pre-IPO S-1’s released by certain other companies (you know who I mean…) or similarly creative accounting by Overstock. Well, I feel this is true, in my not Certified Public Accountant-qualified opinion.
The grumpy accountants continue,
…we’re traditionalists, so the first thing we did was to compute the Altman Z-score. After all, if you can’t find a pulse, there isn’t much use in testing for other signs of financial health.
There is no slavish devotion to models here. Remember, these accountants are academicians. They probably need to toss in a statistical aside now and then. The single table of model results, 8 rows x 2 columns, is backed up as follows:
Driving these results are negative earnings before interest and taxes, as well as negative retained earnings. Additionally… values are driven by the erosion of shareholders’ equity. The debt/equity ratio rests at a staggering 12.56!
I’d keep my ears perked up for news from Overstock’s auditors. They should be blowing the whistle on this company, as it isn’t likely to continue as a going concern much longer.