David, your numbers are not correct. You are using a method for calculating DSO that assumes that the rate of sales for the 4th Q is the same as the average rate of sales for the year, when in fact the 4th Q rate of sales for Cascade was 97% greater than the 1st Q rate of sales.
DSO for Cascade is calculated correctly as follows: 4th Q AR of 81,949 divided by 4th Q sales of 110,300 equals .743 x 90 days equals 67 days DSO. However, the number the company stated in the conference call was 70 days, so I have used the more conservative 70 days.
Your method uses an incorrect assumption that the rate of sales in the 4th Q was the same as the average rate of sales for every day of the year. Your assumption is not correct, and has the effect of vastly overstating DSO for every company on the list, since every company is growing rapidly. Indeed, the faster the company is growing, the greater the overstatement using your method.
In particular, Ascend's DSO was 52, not the 69 that you stated. Also, the consensus FY 97 EPS estimate for Ascend is much higher than the number that you stated.
Cisco's DSO was stated in the conference call, can be calculated from the quarterly statement, and is much lower than the number that you used.
Cascade's net margin after tax for each quarter in 1996 was also higher than the numbers that you stated. |
