Sure, but then Tiger was probably sold for even less than 0.8 p/s, based on their increased 1998 sales.
I'm not saying Radica is not a good company, and it still appears very reasonably priced. What I am saying is that the Tiger/Hasbro deal is, at best, neutral for Radica, and is most likely a negative. Some seem to think it is somehow a positive development for Radica, and I think that is a sign of overly optimistic enthusiasm for a stock. When something negative occurs, it should be recognized as such, and not glossed over as somehow being good for the stock. Radica's stock price, despite upcoming good earnings reports, will have to battle a wall of worry. "What is Hasbro/Tiger going to do?" I believe this uncertainty means Radica will not attain a more normal p/e this year, but will continue to maintain a below market p/e. We should still get a stock price rise based on increasing earnings, but it will be harder to get an expansion in the p/e multiple than it would have been, absent the Hasbro/Tiger merger. And if Hasbro/Tiger goes after Radica, by announcing a new line of Fishing products for instance, Radica stock will be hit hard. Maybe that is what the shorts think is going to happen, they certainly knew about the merger in advance. Surely Hasbro has a strategic plan to vastly increase Tiger's sales and earnings, or they would not have bought them for $335 million. This strategic plan may or may not include targeting Radica's best-selling products.
Now, if Hasbro were to announce a long-term continuation/expansion of their OEM business with Radica, you can ignore all of the above doom and gloom. If they don't, the uncertainty will continue.
Dennis |
