"When you find yourself in a hole, stop digging."
-- Will Rogers
YRC Worldwide
Which is to say, it benefits YRC shareholders not at all. Little wonder that the stock appeared yesterday in a TheStreet.com article blasting the top five most-sell-rated stocks on the planet. According to TheStreet, barely half a dozen analysts think YRC is worth holding today, and seven say you should put this stock out of your portfolio's misery, and sell. Are they right?
YRC's "black hole" balance sheet
In a word: "Yes." With a market cap of only $183 million, but $945 million in net debt, YRC today looks less like a viable company, and more like a never-ending cornucopia of interest revenue for its lenders. Over the past 12 months, YRC paid $173 million in interest to its lenders -- nearly as much as its market cap. The last year it made enough operating profit to comfortably support such usury was in 2007, when our economy looked much different from today. (Even in that year, the company ran a slight free cash flow deficit.)
True, some say American industry is turning around, and that the transports will follow. From what he's seeing among Berkshire Hathaway
But to this Fool, it seems likely that any recovery that revives YRC's business prospects is just as likely to inflate interest rates. In other words, even if YRC's revenues do revive to the point where it starts making money, chances are it'll be forced to turn around, and give all that money to the banks. Meanwhile, Con-Way
Foolish takeaway
Sometimes, the way to deal with a hole is to stop digging. With YRC, however, we should just fill in the hole, lay flowers upon the grave, and walk away.
