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Technology Stocks : PairGain Technologies
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To: Chuzzlewit who wrote (5162)6/24/1997 5:41:00 PM
From: Clam Clam   of 36349
 
All of the analysts on Wall Street are now looking for flat to down revenues for the June quarter (from March). Robertson, Stephens is now at $68.7mm in revenues for June. That would be a >2% drop from March so using a 50 P/E looks a little bit off to me for a company that is no longer growing. For product companies, quarter-to-quarter growth is a much better measure of what is going on in the business. Of course receivables were up substantially at the end of March so the warning has been out for a while --> hence the stocks poor performance. I am starting to believe we are near the bottom however. I have been buying this name this week. Today's price action was very impressive, IMO. Despite reports of WEAK UNIT DEMAND (not just pricing pressure), the stock finished UP. Even with a meager growth outlook over next couple of quarters, if the company can keep the damage to $0.17, I come up with a minimum price of 30x (.17x4) or $20.4..... That is a decent multiple on a depressed EPS number. If you use Robertson's (now) conservative numbers, PAIR should do at least $.24 in December 1998. 30 x (.24 x 4) = $28.8... Once PAIR gets its receivables back in shape and gets revenues growing again, that multiple should expand somewhat. Looks like one to accumulate at these prices.
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