Ron,
Sorry, but I disagree with your valuation. If the company can grow earnings by 20-25% for 2 more years after this year, it will likely have a P/E of 15 minumum. When the momentum players jump in, they drive it to an extreme and fast. The last time they took it from 10 to 16 in seven days in January 9-20 of 1997 before pulling back to 13. Then the earnings were released on 1/27/97 and it ran to 21 by 2/3/97.
I think 18-1/4 was the magic threshold it had to pass to become positive again. Within 2-3 days, another 200,000-400,000 shares will be eaten up and there will be no one left selling but profit takers. I imagine the trading range will be 23-32 after this week is completed until the next earnings report which is due near the end of May or early June. I expect the stock to trade near 40 after the next report if they continue to grow 25% over last year. Traditionally , sales are flat to down from the 3rd qtr to the 4th.
I expect them to put some of the cash to work buying some undervalued companies soon. If so, it may be relatively do-able for them to maintain more than a 25% growth for the next 3 years. I'll probably use this stock like the average person uses the S&P indexes --- buy every dip, though being more of a trader than an investor, I'll just keep 10-20% of my additions if I can make 10-20% in weeks on a trade.
Congratulations to those who were confident that Hong Kong flu wasn't hitting Deswell, and thanks especially to those who did the detailed research that helped us keep that confident feeling.
Richard |
