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Technology Stocks : Profit from shortage of IT professionals
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To: robert miller who wrote (7)3/1/1998 7:53:00 PM
From: Stewart V. Nelson  Read Replies (2) of 25
 
Robert

CATP is a well managed company with great long term prospects. I would have to agree with the 50% estimate especially with the emphasis they are placing on internet commerce. However, the company has not gone unnoticed by Wall Street! It is currently trading at over 6X sales and 73X earnings!. For comparison purposes, TSCC is less than 4X sales and 48X earnings with similar profit margins but slightly lower growth prospects.

I do not own CATP but if I wanted to, I would try to buy it smart! Wait for a dip and then take a small position. Add to the position as you can. I also think that if we get a correction in the overall tech segment, it will bring all the expensive stocks down. You might get an opportunity to buy during the next "tech wreck".

I believe that they might have a bubble of ERP business in their pipeline that will not get replaced when firms cut back installing ERP software to solve year 2000 problems. Even with their rapid deployment, time is running out to use the replacement approach to Y2K remediation. This could provide you with the opportunity to add CATP to your portfolio. The momentum players will dump the stock if top line growth is not 50%.

All in all I would have to say that I love the company but not at the current valuation which assumes the growth rate and margins will stay intact. They are having to raise salaries to keep retention up. They have done a good job of passing these cost increases along to their customers but a general slow down in profits later this year will build in some inertia for future cost increases and put some pressure on margins.

Thanks for your interest. I hope this answers some of your questions.

I own TSK, TSCC and have been watching CATP looking for an opportunity to buy.

Regards
Stewart Nelson
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