Dave-
I don't know QLGC well, but I performed a cursory overview. QLGC's financial situation looks very good, to say the least. The stock is trading at 2x cash & investments. It looks like there was a secondary offering several months ago. I don't see why this was necessary, nor do I understand why the company needs so much liquidity. I like the increasing margins, but I'd like to see a higher revenue growth rate. If you price out the cash & investments, the market is valuing QLGC's business at ~$14 per share, or slightly more than 10 times forward EPS estimates. If QLGC can find an attractive investment for its stash of cash, it could improve its return on equity a lot. Overall, it looks very cheap, and it could be a great investment from current prices.
If I may mention a stock I like:
NovaCare Employee Services (NCES-$6) is the second largest professional employer organization (PEO) in the country, and it is a 77%-owned subsidiary of NovaCare (one of my 1998 favorites). NCES recently had an IPO at $9, and has since slipped under the radar of the market. PEOs are companies that manage HR functions (payroll, health benefits, consulting, workers comp, etc.) for small businesses. NCES has been leading the consolidation in this highly fragmented industry, which is projected to grow by 25-30% annually for the next 5+ years. By becoming the employer-of-record for hundreds of small businesses, NCES can get very good prices for health insurance and other employee-related costs that are affected by scale. Street estimates for NCES call for $.20 in FY ending 6/98, $.38 for FY ending 6/99. I have a 2-year target of $20 on the stock. NCES should be releasing earnings in the next week or so, and I think that a good report will help the stock (estimate is $.04).
Today, I tripled my position in NCES.
Todd |
