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Technology Stocks : GenRad Inc.(GEN) entering the ADSL market!
GEN 25.74+1.1%Nov 7 9:30 AM EST
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To: Ford Investor who wrote (30)3/17/1997 9:04:00 AM
From: Mark K.   of 283
 
"Obviously"?

Steve, let me address a few of your points:

1. Zacks earnings estimate for current quarter is $.32 and for fiscal year 1997 $1.33.

While this is true, you failed to point out that both of those estimates include a one-time `valuation allowance' gain that is expected to be reported in the first quarter related to tax benefits resulting from the company's high NOLs (they reported a similar gain in the first quarter last year). That one-time gain is estimated to be around $.08 per share. From operations, the estimates were $.25 for Q and $1.25 for year. When the company states "between $.20 and $.25 per share for quarter", that is from operations, not including the gain. I agree it is confusing, but the lowering of estimates was not nearly as dramatic as it appeared.

Also, you indicate there has been `obvious manipulation by insiders". Do you have any evidence to support this rather serious charge?

2. You made the comment "obviously GenRad is banking on a huge contract in the future". GEN is currently bidding on a fairly large ADS contract with Ford North America. No revenue from that contract has been built into any of the earnings estimates, so I am unsure of what you mean by "banking on".

A low P/E of 15 on a low estimate of $1.18 per year would give an $18 stock. A 20 P/E on the $1.25 would give a $25 valuation. On what valuation basis do you conclude "there is a lot of downside potential"?

The problem with GEN is not its business, but rather its communications skills.
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