Cree is remarkably undervalued.
Last summer I made a spread sheet for predicting Cree's financial performance, with the idea of estimating their share price based on financial fundamentals. I used the Jun02 quarter as the baseline and projected the quarters going forward through Jun06. I adjusted the data for the actual Sep02 results.
Here is the baseline data and my assumptions:
$48.8 million revenue, growing at 75%/year
Gross margins, 45%
$13.458 million in overhead, growing at 12%/year
Tax Rate, 30%
75,500 million shares outstanding, 10%/year dilution
P/E ratio, 40
Note that under these assumptions, Cree would produce the following quarters:
Quarter EPS
30-Jun-02: $0.01
30-Sep-02: $0.05
30-Dec-02: $0.11
30-Mar-03: $0.15
30-Jun-03: $0.19
30-Sep-03: $0.24
30-Dec-03: $0.30
30-Mar-04: $0.37
30-Jun-04: $0.45
30-Sep-04: $0.54
30-Dec-04: $0.64
30-Mar-05: $0.77
30-Jun-05: $0.91
30-Sep-05: $1.07
30-Dec-05: $1.26
30-Mar-06: $1.48
30-Jun-06: $1.74
On 1Jan04, this gives Cree $1.94 EPS for the calendar year 2004. Given a forward P/E ratio of 40, Cree would be worth $77.49. |
