>> According to Stock Smart, as of close today, this stock is trading
at a 45% discount P/E multiple of 12.8x vs 23.1 for the communications sub industry !!<<
Investor, I assume you are talking about the forward PE ratio. The current PE is actually around 18. Based on estimated 1997 earnings of $.60/share the forward PE is indeed just 12.8. However, given the recent announcements of continuosly increasing backlog and strong momentum $.60 may prove to be conservative. Last quarter CGN did $.14 on $5.5 million in sales. Last week, only one month into the 2nd quarter, CGN announced that the 2nd quarter would see SUBSTANTIALLY greater sales than the 2nd quarter 1996 which booked $5.1 million. Therefore, I would not be surprised to see the company do $5.8 - 6 million in sales and have earnings of $.16 - .20/share (these are just educated guesses).
Because of the cyclical nature of CGN's industry the stock will probably continue to trade at a discount to its growth rate (which could be greater than 100%, 1997 over 1996). However, over the past year the stock has consistently traded in a PE range of 10-20. If CGN hits just $.60 the stock could rise to $12.
You also make a good point about interest picking up. 5 years ago when the stock ran from $9 to $18 it was quite common for 100,000+ shares to trade in a day. Last year CGN was lucky to see 15,000 in a day. Over the past month the volume has been gradually picking up and the stock has commonly traded 30,000+ shares. Given the small float a little bit of interest could drive this one up quickly. My broker, who follows this one fairly closely, does think the institutions are starting to nibble.
-nk |
