Four reasons not to buy TPRO:
1. No earnings and dilution required for future growth.
1a. You are correct, bu it is a $6 stock
And it was a $2 stock four months ago. Valuation is extremely subjective when all earnings are in the future. Its pure speculation at this point.
2. Y2K boost, no matter how strong, is temporary.
2a. I strongly disagree. What IF they do the business that is possbile, build huge cash flow, use stock to buy more businesses that will be accretive, and the Y2K business goes for 3-4 yrs instead of 2?
Let's assume their EPS are $0.25 in '98 and double for four years: 0.25, 0.50, 1.00, 2.00, 4.00. That only adds up to $7.75 without any discounting. Discount at 20% and you only get $3.71. Even with four years of hyper-growth, most of the value depends on how fast it will be growing well beyond 2000.
3. Y2K as Trojan horse is plausible, but far from guaranteed.
3a. No issue, that is what we are all guessing about.
Right. If this doesn't pan out, TPRO will once again be an anonymous penny stock. A bet on TPRO is a bet that (a) integration of the factory floor is valuable, (b) the Y2K problem will help plant managers see the value, and (c) there is limited competition for many years.
I have the biggest problem with (c). By the time TPRO is big enough to really benefit from the opportunity, other big players may also see the light and aggressively enter the market.
4. Y2K fallout could very well decimate the entire market, Y2K stocks included.
4a. Y2K can and probably will hit certain parts of market in a big way, but is it not possible that the TPRO's will benefit as a hedge, a concept play, or whatever?
So TPRO only falls 25% in a market that's down 50%. Relative returns may be all that matters to fund managers, but I'm interested in absolute returns in my personal portfolio. |
