Rosetta Stone valuation question | Value Investing News

Rosetta Stone valuation question

  • Today I examined them and read the financial statements of their last quarterly update without looking at their stock price, and see that the underlying operation still is not generating cash and they are struggling to keep their high margin revenues (namely – there is quite a bit of competition in the language learning space and also the barriers to compete in this market are not that high).
  • Likewise, RST has $146 million in deferred revenues on their books which will be ‘guaranteed’ revenues over the next couple years.
  • This is cash that is already collected, which means the valuation depends on how much future cash they can collect – the revenue figure is a lagging indicator.
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