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Strategies & Market Trends : All About Longer-Term Investing
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To: irv_mermelstein who started this subject10/22/2000 1:06:41 PM
From: irv_mermelstein  Read Replies (1) of 15
 
DPMI--A long-term stock

DPMI has given investors something of a wild ride, reflecting the recent uncertainties in the market about the semiconductor sector. The big brokerages continue to look for the end of the semiconductor "cycle." Pretty much old thinking in my opinion. (Smart Money had an interesting piece on this subject in the October issue--they agree that chips are no longer the cyclical business they once were.)The simple fact is that the semiconductor business is not going out of business, and as of now there are two dominant companies in the photomasking process—an essential part of the production of semiconductors, at least the way its done today. One is PLAB and the other is DPMI. DPMI offers the much better valuation, with a PE of 32.5. My target is 104, with a stop loss of 48.625. The stock offers a PEG, over the next two years, between .3088 and .5065 (depending on whether you use the current P/E of 32.80 or the P/E of 20.40 based on the projected earnings for FY01). My preferred method is to use the P/E for the coming fiscal year, which gives me a more optimistic view of the stock. Either way the PEG looks very good. The big issue is whether the company will get its margins and return on equity up. Current entry point is attractive. Expect volatility and hold on, with an eye on that suggested stop.

Irv Mermelstein
www.profitsovertime.com
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