Cymeed,
Here are some of my explanations to your questions, others will with out doubt have answers which differ from mine.
1). What are the reasons of its recent drop since October ? Correction ? Warnings from peer group (COMS, BAY, etc) ? Impact of more shares issued ? Or if there is something more fundamentally alarming ?
I think the brunt of the drop comes as overall weakness in the networking industry. There are many could be answers to this question, but I think you have eluded to the primary concerns, warnings from "peers."
There could be some impact from the newly issued shares, but without know whose hands those shares fell into (institutional or individual), it is hard to make that correlation.
I think it could be successfully argued that there may be some underlying fundamental concern in relation to the stocks share price demise. It seems that there is a strong effort underway for those companies that provide networking solutions, to provide "end-to-end" solutions and MRVC is not building itself to be this type of company. The company primarily builds networking switches and components for use in the LAN environment, with its latest products geared around gigEther technologies. This is a narrow focus for a company to take in this industry and it is also an area in which there is much competition that is expected to start coming on-line within the next several months.
In defense of the company, they have been at the leading edge of devoping and bring to market gigEther technology. The management is extremely hard-working and apparently competent, given their success thus far. They also have extremely compeling financial ratios in comparison with industry averages.
Trialing PE 32 vs. 38 for industry
Pr/Sales 3.6 vs. 5.8 for industry
Pr/Book 3.3 vs. 8.4 for industry
Pr/Cashflw 28.5 vs. 51.9 for industry
Dbt/Eqty .01 vs. .32 for industry
Quick Ratio 3.54 vs. 2.34 for industry
Curr. Ratio 4.72 vs. 2.98 for industry
ROE 20.8% vs. 23.9% for industry
ROA 14.3% vs. 17.16 for industry
PM 11.6% vs. 12.78 for industry
Insiders hold about 19.8%
Institutions hold about 47.7%
2). Their sequential growth rate on a quarter to quarter basis seems slowing down, is this a factor in the share price ? What kind of revenue growth are we expecting in Q4 97 and year 98 ?
Slowing growth can always have a detrimental effect on a companies stock price but to some extent this can be moderated by understanding that trees do not growth to the sky. The mean five year outlook on growth from the analysts following the stock is about 40%. Q4 estimates are at .24, which indicates about 4.3% sequential growth in EPS and F98 EPS projections are for 1.24. In the September quarter the company managed to beat estimates by a penny. There are at least four analysts which are following the stock and three have it rated strong buy and one monderate buy.
3). What make MRVC customers to buy from MRVC, instead of CSCO ?
Good question. The company does sell a lot of its goods to companies which then incorporate the goods into their own propritory products, mainly NIC's, connectors, diodes and I believe some switching products. The company's main competition has actually been Xylan through the past but now seems to be those companies which have recently acquired gigEther technology, such as BAY and CSCO along with some privately held newcomers. The company has built some alliances along the way, namely INTC, and may be able to sustain itself on this basis and by pursuing more of the same. They are going to need to find the next up and coming technology, embrace it, support it with the best products and/or service and hope for the best in order to continue.
I personally think that there is a real compelling case to owning networking stocks which are pursing the end-to-end solution for their customers. It also appears that the markets, at this point, are agreeing with me. I personally like MRVC but can't say that, at least at this point, any of my money is invested in the stock.
Hope this helps.
Wayde. |
