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Technology Stocks : Printronix(PTNX)
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To: Anatole Kulick who wrote (53)7/9/1997 1:17:00 PM
From: David Aegis   of 113
 
Anatole: My notes on and impressions of the conference call are as follows:

1) Management indicated that at a "normalized" tax rate of 30%, EPS would have been $0.35. (PTNX has 3-4 years of federal and foreign NOL carry-forwards, but their California state tax carry-forwards were used up in the March Q). The First Call estimate was for $0.31, but I do not know what tax rate the two Wall Street analysts used to form the $0.31 consensus. Impression: Favorable.

2) Management has raised its gross margin goal to 31% (previously 30%) due to improving gross margins (29.6% in June Q). However, management backed away from an 18% target for operating expenses (21.0% in June Q). Impression: Mixed.

3) Management forecast top line growth at an 8-9% annual rate. Impression: This is not a growth stock. Opportunities to drive cost savings still exist, but I'm a bit concerned as to why management is backing away from its operating expense target of 18%.

IMHO: On a valuation basis, the stock is still very cheap. We have an internal fair value, based on cash flow, growth potential and balance sheet strength of $22 per share. The stock still trades like the company is a broken down bankruptcy candidate, but business has steadied after the transition to the ProLine 5 series of line matrix printers. This risk that that product transition would be a flop is now behind the stock.

--David Aegis
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