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Technology Stocks : Avid Technology
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To: orson sanderson who wrote (300)7/6/1997 11:29:00 PM
From: John Veltheer   of 777
 
Orson,

Here is one that makes AVID look cheap:

3 July 1997: RANKIN AUTOMOTIVE GROUP (Nasdaq: RAVE) declined $1 1/4 to $7 3/4, continuing a sharp slide from its high of $24 1/2 set in mid-May. Dow Jones said "sluggish sales" are possibly a factor, while others believe Rankin was simply overvalued. The company runs operating margins of 2.1% and generates return on invested capital (after-tax operating earnings divided by total assets minus cash and non-interest bearing current liabilities) of 4.95%. Even backing out the goodwill on the balance sheet, the company generated return on tangible invested capital of 5.3%. Neither of these is good enough to even cover the costs of the capital invested in the business, which made people wonder earlier this year why a commodity retailer of auto parts was trading at

******** 47.5 times FY98 EPS estimates, 450 times FY97 EPS, and 103 times operating earnings.*********

If a company can't cover the costs of capital invested in the business, a cash crunch often follows.

JEV
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