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Technology Stocks : Cabletron Systems (CS: NYSE)
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To: Thomas George Warner who wrote (2610)12/10/1997 10:15:00 PM
From: Miles Rhyne Hoffman, CFA  Read Replies (2) of 8358
 
Well "Billy," my data is from the Value Line database:

last 8 qtrs: past to now: Sales= %chg yr/yr, others are "margins"

Sales 31% 31% 32% 30% 31% 15% 10% -7% (last=co.est for Nov 97)
G.Mgn 62% 63% 64% 63% 62% 63% 62% "lower" (no specific # yet)
SGA 19% 20% 20% 20% 21% 22% 23% "higher"
R&D you've seen... it's consistently higher
Depreciation 2.4% 3.4% 4.2% 3.3% 3.3% 4.9% 4.8% "???" (%sales)
Pretax Mgn 31% 30% 29% 29% 28% 25% 23% "way-down"

For non-accountants, the above translates:

*Sales gains are slowing and have turned negative (lower yr/yr)
*Cost of hardware is going up (gross mgn is going down).
*All other expenses are going up.
*The company is making a lot less money (on the margin).

And "Billy", actually the tax rate is slightly down recently.

A major goal of companies is to turn product (inventory) into cash (sales). Therefore the inventory to sales ratio is an important barometer of the success of achieving this goal. The more capital (money) you tie up in inventory, the less efficient you are...

Inv/Sales 31% 36% 40% 45% 45% 51% 52% 51% 49% 49% 51% 65% "???" (recent=n/a ; more data given to show bottom of ratio in 11/94)

Cabletron is turning inventory into sales at a much SLOWER rate.

Cabletron looks cheap... looking backwards. I try to look ahead.

I'm not "smoking" anything and don't need to...I don't own the stock.
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