Ian,
Re PSRs: Don't forget that with this ratio as well
as most others, you're looking at the past which may
not be indicative of the future... especially for cyclicals.
Agreed.
E.g. MTSN has a high PSR: MTSN customers were primarily
from the DRAM sector. As the DRAM makers go to next
shrink, 300MM, MTSN's sales will skyrocket (%age wise).
Maybe, maybe not - I did not investigate the
details. I am uncomfortable with both the DRAM expansion
predictions and the MTSN's involvement in such.
On the other hand COHU is rocketing while its
main customers are Micron and Motorola - two
companies I would not bet on. I think that ESIO was
(and still is?) a safer DRAM expansion play.
If you use low PSR as your indicator on a cyclical
at the bottom of the cycle, you'll miss a lot of
price movement.
I looked up MTSN's sales before the downturn. Their
highest sales were $23 mln. per quarter, i.e.
annualized $6.63 per share. This
still gives a PSR of 2 on the highest pre-downturn
sales. Too high for my tastes. But I have to admit that
I don't have an eye for MTSN. Like Andrew says, I choose
not to play it. ;-)
Regarding SUBM, I saw your discussion with other
people on the thread. I will just add that the turnaround
is not guaranteed, and the investment is risky, but
the price level is attractive. If during the turnaround
their sales drop less than 2 times and during that
time they become profitable, you would be buying the
company at a forward PSR of less than 1. On the other hand,
if they waste the $20 mln cash and lose the market
share in the remaining segments, they could fold.
As a word of caution both Andrew and Carl Johnson did not
like the SUBM products very much.
I always enjoy your analysis and comments.
Good luck
Raimondas |
