Deepak, Ascend had 120M shares out at the end of last quarter. I have used a thumbnail estimate of 125M for next period to allow for the excercise of options.
I did not use a model of historic revenue and earnings. This makes one dependent on the last data point and leads to huge errors when you extrapolate. It is rarely possible to forecast earnings more than one or two quarters in advance.
This is a secret of analysts. To put stock in their FY97 "forecast"is an absurdity. The analysts don't want to look bad, so they keep their estimates low. The company also keeps expectations as low as possible. When earnings surprise, everyone is happy. Wall Street is organized to sell securities to the public. The apparent ability of a company to surprise the analysts is a major selling point.
The way to get a good idea of next quarter's revenue is to find Ascend's own estimate of next quarter's revenue. This is their level
of inventories. Stuff they bought in order to sell. Correctly anticipating future demand is a major factor in the success of Ascend. Ascend's customers are telecomm carriers and internet access companies. Their near-term demand is not capricious.
Ascend had $51M in inventory at the end of last quarter. Ascend's inventory multiplier has been as high as 4.5X, and has averaged 4X, each quarter. That is, last quarter's inventory turns into 4X of revenue next quarter. I am actually being conservative, giving due regard to the rise in long term rates, which can slow telco investment, and a decline in throughput, to reflect a slowing growth rate, of which I might add, there is as yet no evidence other than the recent pullback in the stock's price. I also think the current price action is more likely to be related to the overall market than to specific factors at Ascend.
Deepak, I encourage you and everyone else to get hold of detailed
financial and business information on your stocks. There is no other
way. You are simply not in the game without original prospectus,10Ks and 10Qs. If you like technical information, you will gain added insight, and have the ability to hold a stock in a pullback. For instance, there are about 20 stocks directly related to Ascend, either
as suppliers, customers, or competitors. Bring as much information as you can to bear on the investment problem.
Matthew |
