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Biotech / Medical : ESCMF makes equipment to remove varicose veins!
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To: Philip H. Lee who wrote (7)9/30/1996 9:34:00 AM
From: Fred Puppet   of 119
 
Hi Philip. After buying and holding for only a month, I got a bit worried,
and sold most of my shares in a couple of increments, averaging a little
under 30. What happened was that I used past sales data and some guesses to
try and model future sales. Based on my sales estimates and recent net margins
I came up with an earnings estimate. My conclusion was that ESCMF is fairly
valued at 30. That's no reason to sell, because I didn't conclude it is overvalued.
But then, I realized that my model assumes after tax profits are 40% of sales,
which has been the case for the past couple of quarters. For a U.S. company, this
would be nearly impossible, which is what worries me.

Does anyone have quantitative information on the company, as would be filed
in a 10-Q? I can't find anything at all on Edgar. I am particularly
interested in information related to taxes. Is there some kind of tax loss
carry forward that has allowed them not to pay taxes recently? If that is the
case, net margin will fall when the loss runs out. If the net margin fell to
a healthy 20%, I would conclude that ESCMF was overvalued by a factor of 2.
The general lack of information makes it difficult for me to predict whether
the 40% net margin can be maintained. Does anyone out there have some positive
information? If not, I might sell the rest at 31, if I can get it.

Thanks, Fred
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