Yes, you are right about Encad - I have been looking at the company recently (it seems attractively priced at the moment) and they do have a large presence in this market. What had me thrown was their large presence in the CAD market. I just thought that it was impossible for a company to sell so many printers to a CAD base and still have a large Graphic Arts base. I neglected the fact that they have been selling CAD printer much longer than GA printers and that CAD printers are much cheaper.
It is definitely all marketing awareness and if you look at printer sales as a function of the previous quarter's marketing expenditures, then we are in for a ride next quarter. I realize that this isn't a generally accepted method of estimating revenue but I have found that the multiple is consistently just under 4, rising slightly last quarter because of all the awards. Take a look -
In Q4 '96, RGFX spent 1,696 on sales and marketing and this produced 6,671 of printer sales (consumable sales is a function of the installed printer base) which gives us a multiple of 3.9. 3.9 x 1,696 = 6,671 (the multiple for the year was slightly lower)
In Q1 '97 We spent 2,019 on sales/marketing to produce printer sales of 8,750 which gives us a multiple of 4.3. Assuming that the market hasn't reached saturation, a multiple of 3.9 would give RGFX about 10,000 in printer sales next quarter.
This puts us on track for about a $16 million Q3. The new PosterShop should sell well and I see gross profit margins at about 42.5%. Assuming the worst for the estimated operating expenses at 34%, we have profit margins at 8.5% before taxes.
This is barely .14 eps. The quarter could be seasonally weak and we may see less than this or the market could eat up the new printer line and we could see more than this. Nevertheless, this will be the quarter that makes or breaks for Wall Street
Darren. |
