a company beating earnings by $.02 hasn't been enough to get the juices of some wall street afficiandos moving. However, as has been the case at RSYS, they've beat earnings estimates by $.02 on average each quarter. If you continue that practice into 1998, then you add $.08 to projected earnings of $2.12, or $2.2. And these earnings do not readily account for any upside surprise from compounding revenue from previous and concurrent design wins which are only beginning to generate revenue. RSYS is lucky that it has a base of old "flat" vme revenues on which to rely as PCi bus revenues come on line. It was a great move to purchase the vme from Intel as this business is still expected to increase, although slowly, in the future. Revenue from the multiple design wins throughout 1997 will only begin to show their presence in 1998 and beyond. Of course, the line tells us that immediate expecations are minimal. But, look at Theragenics. We bought THRX at $18 and sold it at $22, and watched it fall back to $16 and grovel between there and no man's land for over six months (they sell a cancer prostrate patch). I finally removed the stock from my watch list. It announced an agreement with Johnson and Johnson which helped the price for a while before it fell back again. I thought that if Johnon and Johnson can't help this stock what can? Three months later (August, I believe) after I removed it from my watch list i saw it trading at $29. Without looking into the matter I considered this an anomaly and let it slide. Over the next few months in ran up to $54 and and is trading at $43 and change. Don't know what path RSYS will take, but they've got the tools for success, let's hope management uses them well.
A similar story was Suiza Foods. We bought it at $15, held it for six months after its intial public offering and watched it trade in a range of $17 to $13. Spoke to Suiza CFO and they were fairly mum although they had plenty of cash from the public offering. We dumped it after seven months. Six months later they announce the purchase of a dairy operation in the South and shot up to around $22. To make a long story short, it's now trading, one year later at $58 and is the largest supplier of milk in the South mainly through acquisitions. Suiza had little outward signs of this success in 1996, but it had a CEO which was very driven.
I also think the key to RSYS is its CEO. If the CEO can move this company in the right direction, RSYS will succeed. Hopefully he won't be satisfied with just a cottage below, a little silver and a little gold. Let's hope he's looking for the manion just over the hilltop. |
