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Strategies & Market Trends : The Rational Analyst

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To: Scott H. Davis who wrote (641)	4/22/1998 11:48:00 AM
From: HeyRainier	Read Replies (2) of 1720

[ Advanced Digital Information: ADIC ] All right Scott, I'm in at 17 1/8. Let's see if the analysts covering this are worth their paychecks. We had that breakout at 17 we've been waiting for for quite a while now. ADIC has a forward growth projection of 27.3% for an 18.2 P/E multiple issue, which leaves potential room for an upward multiple expansion should earnings continue to meet estimates. Estimates have either been met or exceeded for the past 7 quarters I am looking at. ADIC has a current ratio of 4.74, 0% debt/equity, ROE of 17.5%, and is modestly valued from an asset and sales standpoint. Relative to growth, if the multiple expands to meet forward estimates, at a P/E of 25, this would appear to warrant a fair valuation of $23.75, or a 37.8% appreciation from current levels. I'm still watching to see just how disparate ADIC's business is from QNTM's, but I will take the CEO at his word when he says he is comfortable with current estimates. This will certainly be an interesting Rational Trade. Regards, Rainier

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