Teletek is a growth stock.
There are not a lot of growth stocks whose ANTICIPATED rate of growth is much greater than the corresponding PE.
When it comes to growth, one of the most important things to consider is whether the growth is accelerating or deccelerating.
If you draw a circle, and divide it into 4 quadrants, if you spot a company whose growth rate in revenues and earnings when graphed resembles the lower right quadrant, then take a position immediately. Afterwards, be patient. Wait for the next earnings reports which will confirm the story. As long as the earnings are accelarating, you can probably continue to add to your position. The only problem is, most mutual funds look for the same kind of company. And in no time at all, such companies become overpriced. Just take a look at Cascade, Ascend. Now, if on the other hand, the earnings start to resemble that of the upper left quadrant, then beware. As you will notice, at some point the curve becomes flat, then curves down (upper right quadrant). Companies with flat earnings usually don't stay at 0% growth. They GO DOWN. And just as the market discounts the upside, the downside is even worse. The worst stock to own if probably a stock which used to be a fund favorite. The lower left quadrant are companies with decreasing revenues and earnings, but with a smaller and smaller rate of decrease. These are the potential turn-arounds. Once they start turning around (flattening of the curve), they would then exhibit rapidly accelerating revenues and earnings for 2 reasons: The year to year comparisons will be greatly exagerrated. Plus, companies benefit a lot from tax-loss carryovers.
Teletek at this stage, has just turned the corner around !!! |
