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Technology Stocks : Remedy Taking a hit why?
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To: Rick Thomas who wrote (434)1/15/1998 3:06:00 PM
From: Clam Clam  Read Replies (3) of 763
 
Its not just about numbers. Remedy is blaming this on IBM/SWRT but that is not why the stock lost $1 billion in market cap. It is because it became apparent you can't get to be a big company by being a help-desk company. They are trying to do consolidated operations management but that does not have big revenue potential either. Add to that maxed-out margins, competition from multi-product competitors and you had the makings of a change. I didn't short it because I don't short stocks, I just try to avoid fully-valued issues and let the mo' people play the game of musical chairs. Multiples are based on perception and perception changed.

I think RMDY is worth 20-25x earnings, what SWRT was taken out for. The problem is if their margins aren't sustainable, the consensus earnings estimates are too high. Estimates are right now for $1.32. Let's say the real number is $1.10-$1.20 (using lower margins and assuming revenues grow as expected - another risk). That puts takeout value in the mid-high $20's. Let's assume the probability of a takeout is 50/50 (this is a wild guess). So you have a 50% chance of appreciation to the high 20's and 50% chance of dead money. I therefore estimate an expected return of 33% from the current $17 price. How is that for a pile of crap analysis?

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