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Technology Stocks : RWD Technologies Inc (RWDT)
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To: Gary105 who wrote (40)2/1/2001 8:28:43 PM
From: Byron Angel   of 41
 
Heaviest volume in 2 months today over the last couple of days. I think the sudden interest in the stock is most likely attributable to the Fed. RWDT is down because the economy, and in particular the automotive sector of the economy, is down. Aggressive action by the Fed should get the economy moving by the second half of the year which is very positive for RWD. Also, keep in mind that no sector of the economy is more affected by short term interest rates than the automotive sector. The theory that the Fed move is responsible for the pick up in volume is supported by the fact that the great majority of yesterday's trading in RWDT took place after the Fed announcement.

In summary I think January's Fed action (both moves) is very positive for RWDT. Once the economy gets moving again the stock should start to come on. Keep in mind that the stock is cheap. At the peak a couple of years ago the stock was trading in the high 20's at a PE of around 30. A PE of 30 is not realistic at this time but there's no reason the stock can't trade at half that multiple. I think the company will earn about $0.50 this year so fair value is $7.50, or 50% above where we are now. Once the auto industry comes back and e-learning starts to come on I don't see why this company can't earn $0.75 in 2002. Assuming that as EPS pick up RWDT will get more of a market PE multiple of around 20 then with EPS of 0.75 the stock is worth $15 or triple where we are now. Hardly an unrealistic expectation for a stock that has previously traded at close to 30. Keep in mind that even though we know profits will be down some in Q1 the company is making money, the balance sheet looks great, and insiders are buying quite a few shares.
Byron
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