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Gold/Mining/Energy : Direct Focus Inc. (DFXI)
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To: trilobyte who wrote (171)1/26/1998 7:55:00 PM
From: Clement  Read Replies (2) of 768
 
Trilobyte et al.,

I'm trying to find out more about the recommendation. It does seem a little high, but given the growth rate of the company, I think we should be expecting a higher eps this quarter than 9 cents (if growth has kept its pace).

$11.00 is high but I'm not sure it would be unreasonable -- though I haven't yet had an opportunity to run the numbers again (I have been preoccupied with a few other investments). After share buybacks, continual growth of the company's earnings (that ramp up in marketing seems to have been quite successful). I'm not sure about this, but my feeling would be that people would tend to buy more machines in the winter because they feel guilty about not exercising and want to look decent in the spring/summer. Any thoughts/sales statistics?

I'm fairly happy about the Men's Health endorsement -- we've got a good product, now we seem to be getting the earnings and sales.

There's one area that I'm a little more concerned about -- I'm not as knowledgeable about the US statistics which is the more important so maybe some of you know a little more about it -- but the rise in consumer spending in Canada has been fueled by credit (i.e. consumer debt levels are at some of their highest if not the highest levels). So will enough people be able to afford these machines in the next year to fuel adequate growth would be my concern. Mind you, it seems that Bowflex has only scratched the surface in marketing so even if the market is shrinking, they may get more market share.

Clement
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