Earnings Link and Key takeaways... I was worried about the high PE on ZAGG. Should have stuck with my instinct and sold more monday at the bell or tuesday morning - the short-term peak which I predicted spot-on. Thankfully only 8% of my portfolio is in here.
"The increase in cost of sales as a percentage of net revenues for the quarter ended September 30, 2009 as compared to the quarter ended September 30, 2008 is attributable to the overall sales mix shift to wholesale customers which have a lower average selling price than our internet sales and a decrease in overall internet sales for the quarter ended September 30, 2009."
"The decrease in gross profit percentage was due to the sales mix shift from higher margin internet sales to wholesale customers which have a lower average selling price and a decrease in internet sales for the quarter ended September 30, 2009 as compared to the quarter ended September 30, 2008. There are no assurances that we will continue to recognize similar gross profit margins in the future."
Bottom Line:
Just reinforces the risk associated with all small caps. Growing is a challenging thing. In this case, we see that in order to achieve larger volume sales, margins get hit bad... this is why all microcaps should be assigned a lower PE multiple than their peers. <--- START SONG ----> "Risk risk risk baby - chica chica. Analyze it - think about it - all you gotta do baby is look at risk and diversify sweetie. yeah yeah yeah." Oh well now I lose $$ tomorrow. You learn every day!
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