LHS Group Inc (LHSG) Message Board

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Technology Stocks : LHS Group Inc (LHSG)

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To: JOE who wrote (36)	9/14/1997 3:46:00 AM
From: ben luong	of 113

JOE, stop hyping this stock. >> you said:Institutions already acumulated 6+(? # not sure) mil shares in last 3 months WHO ARE YOU KIDDING? LHSG offer 4.8 millions shares in its IPO. No insider is able to sell their shares until 6 months after IPO. The # of short interest is only 192269 shares in 8/97. 4.8 mil + 192269 DOES NOT EQUAL TO 6 MILLIONS SHARES WHICH YOU CLAIM. Where do you get the extra +1.0 million shares that institutions are able to own? >> you said:insider will be able to start sell their shares soon This is good for short sellers. Flooding the market with large number of shares only decrease short seller's chance of being forced to buy-in. These extra shares also shift demand/supply curve to the supply side. This fact makes it unlikely for MM to drive up the stock price. The short interest (192269 shares) is only 0.77% of the total outstanding shares (24916800 shares outstanding as of 8/97). This leave LARGE ROOM FOR SHORT SELLERS TO DO THEIR MAGIC. Look at the ridiculous fundamental numbers LHSG has: (given the last closed price of $49 as of 9/12/97) PE of 1996 (EPS of $0.16) = 306.25 PE of 1997 (estimate EPS from Zack $0.38) = 128.95 PE of 1998 (estimate EPS from Zack $0.63) = 77.78 Price / book value (book value = $0.51) = 96 !!! Price / Sales (sales = 56.9 millions) = 21.49 !!! Profit margin in 1996 = (only) 6% !!! LHSG has only a single big product: BSCS. Several customers of LHSG accounts for MORE THAN 10% OF ITS REVENUE. This makes it very risky - the EPS may fluctuate quite a bit from quarter to quarter. ONE BAD QUARTER WILL TRIGGER MANY MOMENTUM PLAYERS TO EXIT THE STOCK. LHSG may be able to charge its customers large sums of money for its software now. But once the economy is going into recession, these big telecom companies may rethink about their outsourcing strategies. Plus, this billing software industry is very competitive. (you can read the S-1 in online EDGAR) Furthermore, LHSG has several big european customers. The adverse foreign currency problem that plaqued blue chip companies will also affect LHSG in its next few quarter's earnings. In short, with its ridiculous current valuation, I think the downside probability is much greater than its upside. Long-term investors of this stock will get burned if they buy the stock at the current level. I would wait until LHSG release its next earning (after momentum players have their days) and then short it. There is large room in this stock for short sellers.

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