Paul--thanks for your comprehensive, clear analysis.
I especially thought it was useful to plug in the 50% downside surprise assumption for the next two quarters, since the rumor identified a few postings ago must be widespread. It is hard to imagine a more than 50% downside surprise without First Call or Zack's revising estimates before earnings a month from now.
Whether planned by the market makers (the Oliver Stone theory to which I admit I am sometimes drawn) or just a downward trend that snowballed into a panicked sell-off, the sharp decline of the last few days seems unwarranted. Of course, Cornerstone's failure to break into double digits after three consecutive earnings surprises also seems unwarranted.
Perhaps the market wants to see more of a transition from the hardware side to the software side of the business, since Cornerstone's reversal of fortune in 1996 was prompted by increased competition and declining margins in its high-end monitor business.
Anyway, I have ridden out some steep declines on other stocks this spring (into CHPS at 9, watched it drop promptly below 8, now moving on 11 all in less than six weeks; similar story with Ivax, in at 8 3/8, quickly collapsed down to 6 1/2, now around 11 3/4), so I'm ready to ride this one out too.
BTW, I think your book value number is a little low. 3/31/97 balance sheet showed SH equity of $39.33 million. AOL's quote shows 7.48 million shares outstanding (3/31/97 report showsed 7.59 million shares, but CRNR has been repurchasing shares). Thus, book value is approximately $5.25/share. Not to quibble, but cash/share is also a little bit higher than your number, $2.94/share ($22.010 million {3/31/97}/7.48 million shares}.
Of course, these numbers only deepen the mystery of CRNR's current bargain basement price. |
