Sarasota Herald Tribune
December 11, 2002
BY MICHAEL POLLICK

SARASOTA -- StockDiagnostics.com, the company making "cash flow per share" into a major stock market indicator, said Tuesday that it has lined up cash for an aggressive advertising and marketing campaign.

Until now, the Sarasota-based research company has grown through word of mouth and favorable publicity. Now, StockDiagnostics.com has come up with $1.3 million for a campaign that will kick off by the end of this year.

As part of the plan, the company plans to hold seminars in the Sarasota-Bradenton area to familiarize investors with its unique way of measuring a company's financial health, said director of research Michael Markowski, who founded StockDiagnostics.com with his brother, David Markowski, the chief executive.

StockDiagnostics.com takes a number that is readily available from a company's quarterly reports, operational cash flow, and divides it by the number of common shares outstanding.

The company turns these numbers into color-coded charts on its Web site at www.stockdiagnostics.com.

Until this month, investors have used the site for free. Now, the charge is $29.95 per month for basic service.

"Operational cash flow per share," which the company nicknamed "OPS," can demonstrate financial weakness or strength that might not be visible in earnings per share.

Tracking OPS and contrasting it with reported earnings -- the main feature of the company's online charts -- can help an investor spot candidates for purchase or for downside bets through the use of put options or selling short.

Since unveiling a free version of its OPS software on the Internet in May, StockDiagnostics.com has been featured in major publications, including Money and Inc.

Leading the company's list of problem stocks is Sears, the Chicago retailing giant. Michael Markowski said Sears shares, which have already tumbled from $60 in June to $25, are still quite vulnerable.

"We feel Sears is potentially the next Enron," he said.

Enron's once-high-flying shares have become almost worthless since the energy giant declared itself insolvent.

After spotting Sears' deficiency in operational cash flow, Markowski said he found the problem: $30 billion in credit card receivables.

"We were the ones who pointed this out to Chicago's newspapers, Sears' problems with its credit card receivables," Markowski said. He was quoted on Sept. 29 in the Chicago Tribune.

Sears stuck to its upbeat outlook but later admitted it had replaced its credit and finance group president and its vice president of risk management and credit analytics.

StockDiagnostics.com has been refining and building its complex stock analysis and reporting software machine since 1996.

The Enron debacle forced the brothers to re-evaluate their efforts. They would not have been able to predict Enron's demise based on the analytical software they had developed prior to early 2001.

That brought them to their epiphany: plugging the relatively obscure operational cash-flow figure into a per-share chart.

While Enron was reporting record profits, it was actually spending more than it took in. Measuring operational cash flow per share would have revealed it, Markowski said.

While growing, StockDiagnostics and its parent, Newgrade Inc., are still losing money. "Maybe that'll be the next story," Markowski said. "StockDiagnostics.com goes positive on OPS."