Kent, Sparky65,
First of all, let me say I am not trying to get you to change your minds to unload FSI. Everyone has to make their own decisions, in their own way. I would like to make the following observations, however.
I have held the stock for over a year. I couldn't wait to buy it, I thought if I delayed so much as a day I would lose money because it was bound to go up immediately. Obviously, I was very wrong. If I had waited, I could have bought it several times at $10 per share instead of the $13 I paid for it.
A large portion of my original decision to buy the stock was based on analyst estimates. At the time, the estimates were roughly 1.40 per share for FY-97. They also said the growth rate would be > 25 percent per year. When the stock went further down in the fall of 1996, the analysts did not change their estimate. It was almost the end of 1996 before their estimates started going down. After that scenario, I will never put much faith in analysts estimates again. I think they are just guessing when it comes to individual stocks. They may be pretty good when it comes to the state of affairs for the entire industry, like the downturn in the semi business, but not for individual stocks. Analysts may be able to predict Coke earnings to within one or two cents a share, but in my opinion, they are lucky if they get within 50 percent when they project a year or more into the future on small to medium size high tech companies.
Again, I re-iterate, this is my emotion talking, but I believe the just announced agreement will have a positive effect on bookings. That translates to greater revenues and profits. Even a $10M increase in bookings compared to the previous output would have a very positive impact on FY-98 earnings (whatever they are).
Having said that above, I do believe the analysts earnings predictions are important. I don't put any faith in them, but they obviously influence the share price. As noted previously, at $16 per share and the FY-98 estimate of 80 cents per share, the P/E is 20. This puts FSI in the middle of the pack of semi stocks. Ultimately, if I am right, increased bookings will cause the analyst estimates to increase. When that will be I don't have a clue. Based on my previous experience of last year, they were totally off- base for many months.
I would rather look at the company potential rather than the analyst estimates. I still believe FSI has the potential to greatly increase earnings with a relatively small increase in their production level. |
