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Technology Stocks : Deswell Industries (DSWL)
DSWL 3.630-0.8%Nov 28 9:30 AM EST
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To: Ron Bower who wrote (475)2/20/1998 7:12:00 PM
From: kolo55  Read Replies (1) of 1418
 
Deswell should trade at least 10 times forward earnings.

At a rock bottom valuation that is. Since the latest Q run rate is about $3.00 a year, my target is 30 at least. I don't know what the market will do though either. I do know you have to compare this with foreign stock valuations, and I understand the average PE in Hong Kong is about 8. But this isn't a real estate company or some other low growth manufacturer with loads of competition. The business this company is in requires some smarts, specific technical knowledge, and good customer contacts. So it should get a premium PE.

Its about time for another IBD article :)) Only then I might be tempted to sell some.

I agree that the weakest part of the report was the modest 5% sequential revenue growth, although the last Q (SepQ) was a quite a strong quarter for revenue growth (up 23% sequentially) and just being able to repeat those revenues was quite a feat. The company facilities are probably pretty strained, and so its logical to hear the facilities expansion plans. I also noted the rise in inventory, but this can be pretty much explained as you did, as well as by the increased stream of production.

Give the market time to digest this report. Remember this is a micro-cap without much analyst coverage. We could still trade back up into the mid-20s relatively soon. I don't see a tide of sellers at this level.

Paul
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