I'm not as familiar with this industry as I'd like to be, so where I'm wrong, someone point it out to me. :)
I suspect that once an order is in, they can begin delivery almost immediately. Ramp-up time may be necessary if Vari-L is at or near it's manufacturing capacity. But that is not the case here, the company has been expanding capacity ahead of demand.
Other companies wanting Vari-L's product will want their orders, once submitted, nearly right away. The reason is that getting a product to the shelf has enough inherent delays that you don't want any delay from your supplier. I suspect shipments begin with several weeks (6?) of an order.
Seems to me the estimate of how much additional income this generates is closer to:
2.4 million spread over 8 quarters = 300k / quarter, at a 45% margin, = 135k / quarter, divided by the number of shares (5.7m diluted) = .023 / quarter before taxes, or about .015 after taxes - about .06 per year over the next two years.
Of course, while this contract expands revenues there are others expiring that we don't know about and can't take into account. But nonetheless, this is a great press release and seeing several more like this would inspire a lot of confidence in growth.
I've been reading over the 1997 and 1998 annual reports - haven't gotten too deeply into them yet. It seems to me much of the reason Vari-L has been slow to grow in share value is because of the dilution that occurs. Revenues have been consistently growing, profits have been consistently growing, but earnings per share are only growing at a 10-15% rate. With a P/E of 15-20, that puts Vari-L's ypeg at about 1 - or fair value. Seems to me that with the current growth in earnings per share that the stock is pretty close to fair value somewhere in the 10-12 range. Also seems that this is a period of significant growth, and that if the company can keep from diluting shares significantly over the next 12 months, then we may see some more significant growth rates which would command higher share values.
Anyway, that's my 42 cents.
Pi |
