Some SEEQ earnings calculations & analysis............
(Ed - I think I'm in agreement with you about the underlying trends here !)
Somewhat confused by the recent SEEQ price slump, and various comments
about the company, I thought I'd update my analysis to see how things
are going.
The first thing I've done is tried to summarise SEEQ's performance
over the last two years. The following is this summary including any
adjustments to eliminate one-off factors -
Quarter to Revs Earnings
Dec 31 '95 4,801 (293)
Mar 31 '96 7,387 490
Jun 30 '96 8,644 650
Sep 30 '96 10,506 2,005
Dec 31 '96 6,624 34
Mar 31 '97 8,031 614
Jun 30 '97 7,611 811
Sep 30 '97 9,157 1,603*
Dec 31 '97 7,552 1,080
(* 3,228 reported, subtract 1,925 tax claw-back, add 300 litigation)
From the above numbers it appears that there is a strong seasonal
element. On this basis it is worth making rolling 12 month calculations
to even-out this effect. This yields the following numbers -
Year to 12 month
Revs Earnings
Sep 30 '96 31,338 2,852 (This is FY 95/96)
Dec 31 '96 33,161 3,179
Mar 31 '97 33,805 3,303
Jun 30 '97 32,772 3,464
Sep 30 '97 31,423 3,062 (This is FY 96/97)
Dec 31 '97 32,351 4,108
The striking observation from this table is that over the last 18 months,
revenues have been completely static at around $32.5m - Not good !
However, earnings have improved reasonably steadily from 2.8 to 4.1m.
(Largely based on improvements in gross margins as highlighted in all of
the recent quarterly announcements).
I think that we can deduce from the improvement in gross margin that there
is a move towards newer, value-add technology. Coupled with the various
comments about new product availability, it would be reasonable to assume
that SEEQ have nearly established their new product lines and have a good
chance of increasing revenues as these products now ramp sales volumes.
This is also supported by statements in the last two quarters indicating
book/bill ratios are higher than 1, and implying that $18m+ has been booked
in the six month period). If this rate is sustainable, it should mean that
revenues should now be set to grow.
On this basis, it would not be unreasonable to expect the current year (ending
in September) to show revenues of $36m+ and earnings of $5m+ (or > 16c EPS).
If this is achieved, then SEEQ will have achieved a sustained earnings growth
rate of > 25% per annum for more than 2 years. Draw your own conclusions for
what this should justify as a stock price.
At some point in the future we will have to make some significant revisions
as the accumulated tax credits are consumed, but this won't be for a number of
years yet.
It seems to me that, SEEQ is currently undervalued at around $2........
Mark |
