Undervalued Stocks = Low P/E to Growth Ratios Message Board

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Strategies & Market Trends : Undervalued Stocks = Low P/E to Growth Ratios

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To: Keith who wrote (250)	10/10/1997 6:15:00 AM
From: Mark	of 297

Keith - Re: SOLP, something I've seem hit small stocks recovering from a period of big losses is that just as the earnings seem to be recovering nicely, they suddenly take a retrograde step due to the accumulated Tax Credits being consumed. I have no idea whether this is the case with this stock, but are you aware of this "catch" and is SOLP likely to be affected by this ? (The situation is that the IRS gives the company some tax credits for the periods of loss. The company starts making profits and consumes the credits to reduce the taxation. At some point the credits run out, and the stock gets hit for full taxation. Earnings then appear to take a dive, and the market reacts negatively. The clue this is happening is that the tax levels in the financials are typically 10% of profits rather than the full level - 30%-ish I think ? The best way around this appears to be to consume only some of the credits per quarter and reduce smoothly as the credits run out. This way there is no cliff-edge effect, which the market hates !) I agree with you that on the basis of the numbers you've posted this looks undervalued, and is therefore worth investigating further. Thanks for the information. Mark

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