JJB, I was able to listen in on the conference call this morning. Eric Davis, the CFO said that internal estimates regarding SOLP Operating income and Net Income for the 98 year would be: 40 to 42 million for the operating income and 1.7 to 1.9 million for the net income (net income after 40 percent tax). Year on year this would equate to 38 percent growth for the operating income and 33 percent growth for the net income using the low range numbers. Using a conservative PEG of .5 on the 33 percent growth and 5,649,018 shares using the SFAS accounting standard would give a conservative 1 year price target of $4.97. Using todays price of $3.25 would indicate a annualized return of 53 percent. I am somewhat surprised that the stock has not moved back up to the mid to high $3 range. I guess that investors will continue to remain cautiuos in the short run.
There was also a question regarging the effet of a general overall recession (if there is one) on the SOLP business. Mr. Solomon said that he felt that compared to other companies in the Personel Services Industry, SOLP was in relatively good shape because of the equal mix of perminant and temporry placement. Also he noted that one half of the SOLP business is in the area of Information Technology, which is currently in very scarce supply and he doesn't see the demand for these types of workers slacking off even if there is a recession.
Finally, Mr. Solomon commented regaring the $200,000 write off saying they were going to error on the side of conservatism. This is the worst case, and there is no additional exposure. He said they are currently investigating their options and may be able to collect this money. According to one questioner, there may be the possibility of a collection law suit instigated by SOLP, however Mr. Solomon declined to comment on this.
In summary, I thought that the conference call was quite positive and I think that SOLP remains a good place for long term money, and is probably as good a investment as any considering the possibility of a recession, especially considering the prospective reward of 53 percent return for 1998.
Regards,
Greg |
