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Technology Stocks : Vitesse Semiconductor
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To: Dan Spillane who wrote (776)8/1/1997 2:05:00 AM
From: Duane L. Olson   of 4710
 
Well, the last earnings increase was less than 100% on a per share basis (.23 versus .12 prior year), but the number of shares increased significantly as VTSS gears up to try to meet demand; so not bad. The earnings growth rate should slow to about 40% next year, still not bad, and the average of analyst's recommendations has improved ( the average was already "strong buy"). Shane Forbes (LSI Thread) had a chart showing VTSS would have to average 41% annual earnings growth to meet the Value Line projections 3-5 years out(although I think he failed to use compound growth calculations). In any case, the risk seems to be on the side of missing the ride, rather than losing your money. I've tried to find an entry point to buy more, and keep missing.
As for one of the other chip companies coming up with a fab that can generate GaAs chips -- not likely. But that comes from technical folks in the business, not me. Apparently it is a sufficiently difficult process that VTSS essentially has the niche to itself, and likely will continue to do so for the foreseeable future.
And, while I do hate chasing stocks, I think VTSS is fairly priced at 52 times next years earnings (37 X next year's) as the top dog in a high growth niche. But I would sure look at any negatives that might dissuade me --while I continue to try to buy a few hundred more on the cheap :-) Happy Investing! dlo
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