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Politics : RAMTRONIAN's Cache Inn

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From: NightOwl	8/2/2007 2:36:07 AM
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Well... It seems to me that RMTR is still lacking the necessary "keys" to produce a "reasonable expectation" of a >$10 share price. Assuming a reasonably "terrorized" P/E of 30, a $10 price would require annual earnings of 0.33/sh and $8.62M net on a GAAP basis. That would mean $2.15M or 0.08 in GAAP earnings per quarter and since they're eating options at the rate of $2M per year they'd need to generate an "expectation" of clearing $2.6M net earnings in a quarter... at some point. In the most recent quarter they generated only $268K earnings on $12.3M in revenue. That's just over 0.02 of earnings for every $1 of revenue. I can get 0.05 on the dollar for my penny-ante Mom & Pop savings with no risk and FDIC guarantees too... lord only knows what an institutional investor could get. Without the management inspired option expense... they say profit on sales would be a tad under 0.07 on the dollar. Nothing record shattering, but certainly more respectable. Not surprisingly RMTR's profitability, as measured by Profit Margin and Return on Equity is a pitiable 0.80% and 2.04% respectively. Even on a non-gaap basis... the return for shareholders is well below the fully insured return on a savings account at present rates. So why should anyone rush out to buy this stock? Because the analysts think they'll earn 0.12 non-gaap this year? ...$3.13M in earnings for the year? $1.13M on a GAAP basis... I don't think so. So the question remains is there anything out there that could lead a rational person to expect RMTR to ever earn $2.6M a quarter? Assuming a generous rate of 7% on each dollar of revenue that would require quarterly sales of $37M. Even assuming a higher level of profitability it would require revenue of $26M at 10%... that's still double this past quarter's sterling sales of $12.3. Let's say they were to increase revenue in 2008 by 50% to $73.5M... that's $18.38M per quarter. That would give us $1.29M in earnings per quarter at the 7% rate (lets pretend the option expense goes away) which would work out to about $0.05/sh (assuming an additional 1M share dilution for 2007's option awards) per quarter for the year. With a forward P/E ratio of 30 that would give a price expectation of $6/sh. Yet when we look outside... we see shares going for $3.52 today... How could this possibly be? That's a forward P/E of about 17.6 assuming 2008 earnings of .20/sh on revs of $73.5M. Is anyone expecting $73.5M in 2008 revenue? The alleged analysts referenced by YaHooHoo's statistics are showing "averaged" expectations for 2008 of $6.53M ($.25/sh x 26.12M) on only $59.37M in revenues... that's earnings of nearly $0.11 on every dollar of sales! <Hoo><Haa><choke><Hoo> Eleven cents of profit on a dollar of revenue? ...RMTR?! Give me a break. I know they aren't counting the $2M in options expense... But are they going to fire the entire R&D staff? ...Are new products going to dry up in 2008? I don't think so and neither does anyone else based on today's closing price. No matter how you slice up future sales forecasts... the numbers ain't adding up to anything approaching $10/sh. anytime soon. To get there they need to give us two things: 1) A credible expectation for a spike in revenues well above the 25% rate; and 2) A reason to think management can take such a spike and actually get it to the bottom line. Since Staunton has been at the helm every single "reasonable expectation" of such growth on the bottom line has been eaten by restructuring, acquisition, engineering, and options charges. Ultimately this is why the "reasonable expectations" for forward earnings is so low... and $3.52 is considered a fair price... by someone... apparently. Investors are optimists generally. They want to believe the best and will do so if given half a chance. But, if the history of this company means anything, it stands for the proposition that investor optimism is frequently entirely delusional. Then again... a predator has got to prey on something... might as well be other predators... er... I mean "investors." <vbg> Anyway... at present I wouldn't suggest putting any money in this stock above today's 3.40 low. None of the insiders think its worth the risk and I have to agree. <g> 0\|0

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