Sam, I think a lot of people were expecting a stronger report.
Incidentally, let me correct my most recent post where I
gave a rough estimate of 25% as next year's expected growth
rate using the revised earnings estimates. One analyst revised
down to $2.32 (Hambrecht & Quist), another, at Robertson Stephens
to $2.35. Based on $1.81 for the year just ended, the $2.32 estimate
gives
a 28.2% expected growth rate; trailing P/E at a price of
35 is 19.3. (Other estimates may be higher) So PRIA still seems a decent value on a PEG
sort of analysis. However this sort of analysis can be quite
misleading if a stock is cyclical and about to turn down.
Some other interesting numbers from the report, which may have
more to do with its reception by the market:
Sequential changes, 3Q to 4Q:
Revenues, +19.6%
Cost of Revenues +29%
R&D +7.5%
Sales, Gen, & Admin +14.2%
Inventories +18%
Receivables +45%
Contracts in Progress, +25.7%
The receivables and cost of revenues figures look pretty bad.
I'm not saying this is going to lead to more downward estimate
revisions, and worse than expected results, but these numbers and
management comments (secondhand through "infrastructure") suggest
possible difficulty ahead... I think R&D had been growing in line
with revenue (comparing 3Q to 3Q '95, for example); now it
looks like they are economizing there.
I'm not trying to convince people to sell, just trying to present
a complete picture. For now, I feel more comfortable waiting to
see how things work out, especially with the overall market at
current levels.
Howard |
