For whatever it is worth...On October 18, after the earnings were announced and the stock tanked, Reuters said "Shares in Electronics For Imaging, a developer of color imaging technology, plunged 20% on Monday, apparently on continued investor jitters over 4th quarter prospects and bearish news from Xerox, one of its biggest customers".
As I understand it, the "bearish news from Xerox" was that they warned that the coming quarter did not look good. In addition, there was apparently some mention made in the EFII conference call relative to less being expected from the 4th quarter than was experienced in the 3rd quarter being being. Later, that statement was "clarified" by someone with a statement that all that the speaker meant was that EFII's 4th quarter was always worse than its 3rd quarter. On checking this in the Wall Street Journal's Briefing Book, I noted that EPS for the quarter ending 9/30/98 were $0.31 and that the next quarters 12/31/98 earnings were not down but were up i.e., $0.34. Who or what to believe I do not know...but I do know that it is a good company with a good product with great market penetration and acceptance with good management...but, it is still selling for 26 x earnings...and, while that is considerably lower than it was, it is still pretty high...even for this company / industry / over-all market. My best guess is that it has bottomed...that it will trade in a range trending up slowly for awhile...and that taking a position here...averaging up a point at a time into the next earnings release...with appropriate stops...will produce a nice gain...provided that the "smoke" surrounding the coming 4th quarter does not prove out to be a repeat of the disasterous 4th quarter 1997 in disguise. Rational responses would be appreciated, Mike |
