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Technology Stocks : Flextronics International (FLEX)
FLEX 55.29+1.4%Nov 21 9:30 AM EST
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To: kolo55 who wrote (685)6/8/1998 12:05:00 PM
From: 18acastra  Read Replies (1) of 1422
 
Flextronics upgraded to Strong Buy by Alex Brown this morning.

Also of interest another potential near-term catalyst for the stock:

Flextronics has about $.20 of goodwill ammortization flowing into its P&L. The $2.40 EPS estimate for this year is really about $2.60 on an adjusted cash EPS basis. None of the other large public companies in this sector (JBL, SCI, SLR) have a material amount of goodwill amortization in their EPS numbers. Unfortunately, people on Wall Street are somewhat lazy/indifferent about breaking out goodwill ammortization from Flextronics P&L to get them on an apples to apples basis with their publicly traded comaparables. People should really look at Flextronics at $2.60 cash EPS to make it comparable to its peers.

Here is a potential catalyst to get people to do that: Celestica will be IPO'd in about the next month. Apparantly, Celestica has a bunch off goodwill ammortization going through their P&L. The only way Celestica can get a reasonable valuation in their IPO is to get investors to look through the goodwill ammortization by using a theoretical cash EPS number. If Celestica is succesful doing this, I suspect investors will become more aware that Flextronics has a similar goodwill ammortization number and will be willing to think about their earnings on a cash EPS basis as well.

If that happens, it will be very good for Flextronics stock. 18x (current multiple) an additional $.20 of EPS gets another $3.60 in share price.

My opinion.
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