@Dr Pain,
@bbobbo,
@Hammer of Thor, and others!
Interesting discussion. I learned something. Clearly Deflategate had nothing to do with the BP Contract termination and the diminished revenue streams related to the price of oil, which latter have impacted many businesses.
On the surface this is a very healthy company. It's trading at four times Book. It is very liquid (Cash on Hand exceeds total Current Liabilities). Total Debt(ST and LT)/Equity is 0.39. There is very little LTD at all. But, now the market is punishing it. Why?
Revenues historically have gone up three percent or so per year with flat expenses, so everything fell to the bottom line. Thus, the high multiple. They are very generous to themselves with their Stock Based Comp, but that's not unusual for Information-based Service Firms.
Now, however, their revenues have flattened and the expenses are ticking up, so EBITDA is down. Markets are cruel and they've been hammered.
So, my 25 cent analysis is that this is a company run by a bunch of scientists who are now in over their heads as businesspersons and is at a turning point.
The company has a high multiple because it has been a reliable producer of cash. It either has to grow earnings again or the Analysts will insist that it cut costs and scale back. Or, someone will come in and buy it and do the job for them. With all the Cash and Short Term Investments on the Balance Sheet, you could use their own Cash for a good part of the purchase price.
If I were advising them, I'd suggest that, if they can't grow revenues organically, they use some of that cash along with their high-multiple shares to buy a related company to enhance their earnings and put in a bunch of poison pills to make a takeover unattractive.
If I have nothing else to do next Wednesday at 4:30, I think I'll listen to the Earnings Call.
PS: All the high level, highly visible criticism of their work for the NFL has drawn unwanted media attention to more serious matters related to Second Hand Smoke and Toxic Waste. In other words, if I'm going to need an Expert Witness to sweet talk a jury into seeing things my way, I might think twice about the line of questioning that a ravenous Attorney on the other side might pursue against an Exponent employee on the Witness Stand. But, I don't think that alone is sufficient to explain what's going on.
