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Technology Stocks : Catalyst Semiconductor (CATS) -- What's New?
CATS 25.89+1.6%Jul 2 5:00 PM EST
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To: DeadHead who wrote (134)6/12/1997 3:57:00 PM
From: slob   of 436
 
Gordon, Margin, Balance sheet and Inventory all look horrible.
I was expecting to see an inventory write down, makes me believe that they are carrying a lot of inventory at above Market just to make the Book Value look OK. I think that Margin is the critical item unless that improves than CATS is dead.

From a price to Book side it's at about 1.1 which is OK (note that book is mostly Inventory). Trouble is that if I look at this stock based on P/B valuation than I conclude that a stock like OPTI is much better value without the inventory downside risk.

From a Price to Sales it's about 0.3 ( this is great, until you remember that these are commodity products). In commodity products Margin is all that counts, you trade Margin for market share. If Margins improve than this stock will shoot up like a rocket, has the potential to hit $10 based on P/S or P/E valuations. Equals lots of upside potential.

I heard that both UMC and TSMC increased 98 wafer prices by between 10 and 15% this week. If this is true, it indicates that the fabs are having no trouble staying full and that CATS margins will stay very tight for the next year or so.

My conclusions, I'll be keeping a close eye on Flash spot market prices. Any price firming will be a Very strong Buy indicator, otherwise were all in for a slow death.

SLOB

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