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Technology Stocks : The New QLogic (ANCR)
QLGC 16.070.0%Aug 24 5:00 PM EST
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To: trendmastr who wrote (16757)6/22/1998 1:08:00 AM
From: Joe Wagner  Read Replies (1) of 29386
 
Value is based on Net Present Value of future revenue streams. The uncertainty of what they will be is what causes the stock to fluctuate. I am no expert on this but with a company in this type of situation one has to look out at least two years to value it properly. A short sighted outlook for the next year might be :

3million x 4 quarters = $12 million in revenue
If they make a 10% profit, that = $1.2 million
1.2/ 11 million shares= $.11 per share
at a PE of 30 this equals a value of $3.30

or get one OEM deal that puts revenue at $20 million with 10% profit
PE of 30 $5.40
PE of 60 $10.80
with 20% profit margin it would be double with
PE of 30 $10.80
PE of 60 $21.60

A longer term outlook would more accurately value a company like this as follows:
In two years with an exploding Fibre Channel switch market Ancor could probably capture on its own, without an OEM much more than 10 or 20 million in revenue. Therefore if it can stay afloat it should be worth substantially more in a few years. Because of the huge potential for future income Ancor should carry a very high PE.

If in two years Ancor had 25 million in annual revenue with a 10% profit margin and a PE of 120, the price would be $27 per share. This sounds very possible to me with no OEMS because the market should be growing very rapidly at that time. Someone a while back predicted a switch market of almost $1 Billion in a few years.

If in four years Ancor has annual revenue of $80 million with 20% profit margins, and a PE of 120 it would be valued at $175 per share.

Sincerely,
Joe W.
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