I’ve long said that Fitbit Inc (NYSE:FIT) made a nifty little product that would never move beyond being a fad. It made me sad to say this, because anything that helps people move towards a healthier lifestyle is a good thing. The problem with Fitbit, and therefore FIT stock, is that good intentions don’t equate to a good business.

There’s an overarching problem when it comes to dieting and fitness. People don’t like to engage in it. Sure, there are fitness buffs for whom fitness is a thing. But let’s face it: We all like to eat and most of us hate to exercise.

Now, many businesses have been built on the dreams of weight loss. There are several multi-billion dollar companies that have programs and products and nutritional edibles, and they have made a lot of money over a very long time. That’s because diets don’t work. They will always fail unless one makes a true lifestyle change. Everything else is temporary, however long some temporary programs may last.

However, all those programs are big businesses because they depend on repeat purchases. FIT stock never had a chance because a wearable gets purchased once and that’s it. People use it for a while, then get sick of it because 1) they aren’t losing weight, or 2) they are but aren’t keeping it off, and/or 3) they hate wearing a thing on their wrist (like I do).

Now, James Brumley pointed out recently that FIT stock may eventually see a boost if it is able to leverage the medical device industry, and incorporate itself into that world. These are intriguing developments, and I think there may some kind of niche B2B model that might work for Fitbit and keep FIT stock buoyant for awhile.

A Look at FIT Stock Numbers

That’s going to be necessary because as a consumer product, Fitbit is not going to cut it. When you look at the financials behind FIT stock, they tell the story. Revenue has been growing but that growth has slowed dramatically. Between FY14 and FY15 alone, revenue grew 150% from $745 million to $1.85 billion. Yet then it only grew 18% in FY16 to $2.16 billion. The trailing 12 months tells a really awful tale, however. Revenues are only $1.62 billion.

Meanwhile, the cost of revenue between FY14 and FY16 more than tripled, R&D exploded from $54 million to $320 million, and SG&A more than quadrupled from $145 million to $638 million. Thus, operating income in FY15, which was a decent $176 million, fell to a loss of $103 million in FY16. That loss has widened to $377 million in the TTM.

That means there should be no surprise that, after hitting $79 million of free-cash flow in FY15, FCF for the TTM is now negative to the tune of $17 million.

Bottom Line on FIT Stock

The good news is FIT stock sits on a cash pile of $659 million. It will be able to operate and hold its own for some time, probably long enough to determine if there is a pivot here to medical device applications. That being said, I don’t see FIT stock as an investment. The fluctuations in FIT stock price, however, does suggest it could make for solid trades on both the long and short side.

FIT stock has a solid floor at $5 per share. That makes sense since it has $3.50 per share in net cash. With FIT stock now at $6.71, it means the market is valuing the business at $3.21 per share, or about $735 million. That’s about 0.45 times revenues.

FIT stock bounced off the 50-day moving average at $5.83 and cranked up to $6.71. There is solid resistance at $7. I might consider shorting there for a 10-20% move down, but use a 7% stop loss. Then I might buy back close to $6 or so.

Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance and is the Manager of The Liberty Portfolio at www.thelibertyportfolio.com. He does not own any stock mentioned. He has 22 years’ experience in the stock market, and has written more than 1,600 articles on investing. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.