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Technology Stocks : TAVA Technologies (TAVA-NASDAQ)
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To: Jack Zahran who wrote (7036)12/10/1997 11:23:00 AM
From: Skeptic  Read Replies (2) of 31646
 
Skeptic, do me a favor and read the following post that I submitted with regard to why I feel TPRO hasn't moved to $45 yet. I'd like you to play Devil's Advocate on it.

Message 2908439

My opinions on your points:

All the talk about marginability and warrants and private placements suggest manipulation. There may be nothing to these issues, but they smack of shady dealing and raise my level of suspicion.

Y2K hype may be an issue for the general public, but I think that serious investors can easily differentiate the real players (like TPRO) from the impostors.

I think the real issue is fundamentals and valuation. Sure, TPRO's prospects are bright, but at what price are they fairly valued? In theory, a stock's price is the present value of its future cash flows. Using earnings as a proxy for cash flows, where does TPRO get $6 of discounted earnings from?

IMO, this is the real trap in Y2K investing. Current earnings add little to a stock's value unless they are perpetually growing. In a typical DCF analysis, earnings for the next five years may account for only 25% of the stock's value. Anyone expecting huge profits in Y2K stocks either doesn't appreciate this or is speculating on extreme overvaluations resulting from a Y2K panic (the greater fool theory).

It has been suggested that Y2K will provide a giant boost to TPRO's previous stagnant growth in its core business. This is certainly feasible, but is far from guaranteed as most seem to be assuming.

Would anyone like to take a crack at earnings for the next 5 years, a growth rate thereafter, and an appropriate discount rate? It will be interesting to see the theoretical value that results and the assumptions that are made to get there.
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