Rambus (RMBS) - Eagle or Penguin Message Board

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Technology Stocks : Rambus (RMBS) - Eagle or Penguin

RMBS 94.60

+0.2%

1:57 PM EST

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To: Rachel M. Kuecks who wrote (3182)	3/2/1998 11:57:00 AM
From: TEColeman	Read Replies (1) of 93625

Presently RMBS is making about 3.3 million on 30 million in sales (profitability around 11%). Why do you expect them to increase profitability to 50%? Assumptions based on today's stock value: Capitalization = 1 billion For a PSR of around 2.0 then their sales would have to be around $500 million. If they maintain a profitability of 11% then their earnings would be 55 million. That's 2.43 per share (a 16 fold increase in earnings, or 1600%). At 2.43 per share and assuming a P/E of 30 for a growth stock, the most I can see RMBS going to is 72$. But, I would be unlikely to buy a 1 billion$ company at PSR greater than 2.0 (in fact it would be around 4.0 for this example) and P/E of 30 (and I'm guessing so would most of the market), so I believe that the stock is already as high is it is going to go (short term) and will probably pull back some due flat returns for the next 2 quarters. Don't get me wrong.. I'm not a long term bear on RMBS, I only see it moving down or flat the next year. As long as they can maintain a unique product without competition, then sometime next year they will continue their climb.

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