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Technology Stocks : MRV Communications (MRVC) opinions?
MRVC 9.975-0.1%Aug 15 5:00 PM EST
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To: Sam who wrote (411)10/15/1996 1:06:00 AM
From: Young D.T. Nguyen   of 42804
 
Sam, 20% quarter-over-quarter growth would be fantastic, equating to about
107% annualized growth each year. While this is easy to achieve during very
early stages of growth when revenue and EPS are very small - this rate can
not be sustained after certain levels of revenue and EPS have been reached -
due to market saturation, competitions, and technology maturity, etc.

MRVC may have gotten to a stage where 100+% growth can not be
sustained. I would gladly take 50-60% annual growth. However, growth tends
to be in big spurts with new products, then leveling out. We may be
at the beginning of a "spurting" with the shipment of MegaSwitch and
then the GigEthernet - so there are good reasons to be optimistic. And I
do share your optimism - but I would not be disappointed if MRVC does
not meet 20% quarter-over-quarter growth for each of the coming quarters.
There will be bumps in the road.

Using your 20% QTQ growth projection, I computed estimates for revenue
and EPS - starting with Q195. The projections are shown below. Note that
EPS and prices are pre-split (should be divided by 2 to get current, or post-split,
numbers).

1999 price based on a 20% QTQ growth would be 11 - 22X current price.
Not a bad return on investment. At 107% annual growth rate, a PE of 50
would yield PEG of 0.50 - a great discount. Most tech leaders have been
and are trading at PEG of 1.0 or higher.

Rev. @ EPS @ Price @ Price @ Price @
Quarter 20% Actual 20% Actual
Ending Growth Rev Growth EPS PE=50 PE=75 PE=100
Mar-95 6.7 6.7 0.080 8.0 16.0 24.0 32.0
Jun-95 8.0 8.3 0.096 9.8 19.2 28.8 38.4
Sep-95 9.6 11.1 0.115 11.5 23.0 34.6 46.1
Dec-95 11.6 13.0 0.138 15.4 27.6 41.5 55.3
Mar-96 13.9 15.5 0.166 17.6 33.2 49.8 66.4
Jun-96 16.7 19.6 0.199 21.0 39.8 59.7 79.6
Sep-96 20.0 22.9 0.239 23.0 47.8 71.7 95.6
Dec-96 24.0 26.1 0.287 25.0 57.3 86.0 114.7
Mar-97 28.8 0.344 68.8 103.2 137.6
Jun-97 34.6 0.413 82.6 123.8 165.1
Sep-97 41.5 0.495 99.1 148.6 198.1
Dec-97 49.8 0.594 118.9 178.3 237.8
Mar-98 59.7 0.713 142.7 214.0 285.3
Jun-98 71.7 0.856 171.2 256.8 342.4
Sep-98 86.0 1.027 205.4 308.1 410.9
Dec-98 103.2 1.233 246.5 369.8 493.0
Mar-99 123.9 1.479 295.8 443.7 591.6
Jun-99 148.6 1.775 355.0 532.5 710.0
Sep-99 178.4 2.130 426.0 639.0 851.9
Dec-99 214.1 2.556 511.2 766.8 1022.3

(The actual EPS are in cents and should be divided by 100. 3Q and 4Q96 "actual"
revenues and EPS are estimates by Hamshire Securities. I also use "forward" PE
based on 4 times current quarter 's EPS.)

Young
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