Aames Financial (AAM) - Undervalued or what??? Message Board

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Non-Tech : Aames Financial (AAM) - Undervalued or what???

AAM 10.63

+0.3%

Nov 12 12:51 PM EST

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To: Bankceo who wrote (330)	12/13/1997 12:24:00 AM
From: david wright	of 510

The consensus estimates for AAM are $2.04 and $2.39 for '98 and '99 respectively. Even if these are adjusted down 40% to $1.24 and $1.40 and with an historic average PE of 14 the fair value would be $17 and $20. If you use the PEG method AAM has a growth rate of 20.5%. With this figure the targets would be $25 and $29. Unless the analysts are complete frauds this stock has very little downside and a good upside potential at this point. Momentum and panic has taken over but the risk/reward still looks good at these levels. If the interest rate environment continues downward and inflation remains tame in the housing market I suspect the rush to refi will be minor. Human nature being what it is people refi after the bottom on the way up and not before. If housing prices don't appreciate dramatically the B paper borrowers will not be refinancing very soon. Aames is moving to reduce its correpondent loan operations and focus on the A paper market more. This will give them more control over their loan quality and reduce their risk.

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