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Technology Stocks : RATIONAL SOFTWARE- BUY OR HOLD

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To: Alomex who wrote (2473)	7/27/1998 6:01:00 PM
From: Alomex	Read Replies (2) of 3115

Lets operate under optimistic assumptions and we get that revenue will start growing again and earnings will double, assume a 20 P/E and what do we get? $16.50 per share. Revenue was down sequentially.... How optimistic are the assumptions? Very. Revenue has not grown in ages and profit margin is stuck at below 18% for the last six quarters. For earnings to double, profit margins should reach 25% (double those of oracle, peoplesoft, baan). In other words, the optimistic assumptions are perhaps achievable but hardly surpassable Profit margins in latest quarter: 9.6% IMHO, this company is fully valued as it is.

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