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Posted: 5/19/2015 11:10:48 AM EDT
I've done well in the market so far in my life (early 30s), but since ~2008, its been hard not to make money. I've mainly been invested in low fee ETFs and mutual funds that track the S&P or similar with a handful of blue chips thrown in (MO, XOM for example).

I'm looking to build my investing skills a bit, and learn more about what to look for in a growth company. So here is one, based purely on concept, that I like CYNO. With vain baby boomers getting up there in age, and the huge number of inkys that are likely to someday regret the PBR tattoo they got on their neck, I see a lot of growth potential.

But....I know squat about looking at a company's financials, digesting them, and discovering whether or not a stock is in good economic health. So, all you who are willing to educate me - google CYNO and spit out some comments. Please back up those comments with your reasoning so I can learn a bit more.
Link Posted: 5/19/2015 1:33:58 PM EDT
[#1]
The fundamentals don't look horrible, but there are a couple red flags for me.  First, the institutional ownership is a little over 83%.  This can lead to a lot of volatility if the business does not to perform to expectations.  Second, it's currently trading at its 52-week high.  There is a level of support in the $31-32 range, but unless you are planning on investing in this long-term, now might not be the best time to enter if you're primarily looking for growth.

Medical device companies are tricky to valuate because there is a ton of competition and a lot of the services/goods they offer often only fill niche market segments.   A company that is not diversified is exposed to significant risk.  Because patents expire at some point, the company must constantly innovate to remain relevant (which is true for any company, really) - this is the risk that you take with less-established firms.

Probably my biggest concern with a company like this is their intangible assets (Goodwill, IP, etc) account for nearly 30% of total assets.  Intangible assets make it very difficult to valuate a firm's true value without dedicating a lot of time to research.

The best advice I can give you is that unless you are willing sit down and figure out discounted cash flows, WACC, discount rates, etc it is in your best interest to stick with index funds.  Typically I only invest in individual stocks if a certain sector is underperforming (energy is the most relevant recent example).  Even then, comparing the performance of companies to their peers is tricky due to accounting/financial reporting procedures that are unique to the individual firms.  It really takes someone that has the experience of the sectors they're analyzing to read between the lines and determine whether a company is undervalued or not.

Only about 3.5% of my total portfolio (not including my company's ESPP) is dedicated to individual stocks, but I am more concerned about my long-term financial future than making a quick buck on stocks in the short-term.  I could be dead wrong on my quick review of their financials, and the stock could soar another 2000% by next year, but I prefer the unexciting, slow and steady growth of index funds.
Link Posted: 5/23/2015 8:51:56 AM EDT
[#2]
There a few good books on reading a company's financials. I'm no expert but if you start reading a lot of them, they will start to make sense. I bought an old book on stock investing for $2 on sale that had a section on reading financials for the amateur. Best $2 I ever spent. There are 3 statements that are really just different ways of looking at the same thing.



Income Statement

1. Look for increasing sales (unless there's a reason like cyclical downturn in oil prices or recession)

2. Decreasing expenses or same ratio to sales

3. Increasing net income

4. Increasing EPS Diluted

5. Diluted share count not increasing by a large amount



Balance Sheet

1. Lots of cash

2. Lots of current assets compared to current liabilities

3. Low or no long term debt



Cash Flow Statement

1. Positive increasing free cash flow (Operating Cash Flow - CapEx) This one is the most important to me. Accountants can use a lot of tricks to make some of the other numbers look good but free cash flow is good picture of how the company is really doing. I won't buy unless they have four of the last five years showing positive free cash flow.





Then read the 10k for the risks management thinks might affect the stock.      

Link Posted: 5/23/2015 9:53:51 AM EDT
[#3]
Looking at CYNO. They meet a lot of the requirements I look for but the sales growth slowed a lot while the expenses to make those sales went up. Sales were increasing at double digit amounts but 2014 only went up 5.6% and gross income went down 9.3%. If you are buying this for a growth stock that would be a problem in my opinion unless they have a good explanation.



The balace sheet looks good to me. I like that they have almost no long term debt and current assets are about 3x current liabilities. Their free cash flow was positive for 4 of 5 years with the last year showing the largest amount so that's good in my opinion.



I don't like that they missed earnings last time and have doubled in price since last November on slowing growth. Might be a great company but they look over priced to me. I'd wait for a pull back. Of course now that I've said that it will probably double.  
Link Posted: 7/21/2015 9:36:55 AM EDT
[#4]
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Quoted:
Looking at CYNO. They meet a lot of the requirements I look for but the sales growth slowed a lot while the expenses to make those sales went up. Sales were increasing at double digit amounts but 2014 only went up 5.6% and gross income went down 9.3%. If you are buying this for a growth stock that would be a problem in my opinion unless they have a good explanation.

The balace sheet looks good to me. I like that they have almost no long term debt and current assets are about 3x current liabilities. Their free cash flow was positive for 4 of 5 years with the last year showing the largest amount so that's good in my opinion.

I don't like that they missed earnings last time and have doubled in price since last November on slowing growth. Might be a great company but they look over priced to me. I'd wait for a pull back. Of course now that I've said that it will probably double.  
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Well, it didn't do that....but it is up 18% in the past two months
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