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Biotech / Medical : Novacare (NOV) breaking out...
NOV 15.80+0.8%2:16 PM EST
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To: E. Graphs who wrote (137)10/4/1997 1:43:00 AM
From: Todd D. Wiener   of 420
 
I've completed my research on NCES. It looks like it has excellent prospects. The reason that the name was changed from NovaSource to NovaCare Employee Services was to take advantage of NovaCare's name and image, thereby reducing the costs of marketing a new brand name. The cross-marketing between NCES and NOV is quite impressive. Each company will increase the other company's business. The IPO of NCES will help NOV and us, even if we don't buy any shares of NCES.

NCES is offering 4.5 million shares, which means there will be about 25 million shares outstanding following the offering. The proposed offering price is $12. By the time the IPO takes place, NCES should have $1 billion in trailing revenues.

The stock will probably come to market with a price/book ratio of 6 and a price to sales ratio of .3. Earnings have been increasing, but they're still very slight, considering the gross margin is about 3%. As that number increases, its effect on earnings should be significant. Net margin is about .5% of revenues.

I like NCES' growth plan, as well as NOV's interest in increasing NOV shareholder value through the appreciation of NCES stock. NOV will hold about 77% of NCES stock after the IPO.

I don't know the actual date of the IPO, but we should be hearing soon.

Todd
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