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Microcap & Penny Stocks : The Henley Group, Inc. (HNLY) undervalued growth company
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To: Gator who wrote (1692)7/29/1998 7:39:00 PM
From: Psycho Killer  Read Replies (2) of 2232
 
As I wrote when Mr. Magnotta of MGRA made his deal to sell shares to HNLY, the publicly-announced terms made the deal look like a fire sale. That is, key insider was selling his MGRA shares for what seemed to be very little, suggesting that he knew MGRA was going to go on losing money.

The time lag between that announcement and the decline in MGRA price surprised me a bit, but it looks as if decline has begun.

Key for MGRA will be next earnings release. MGRA has been losing money consistently. People who are bullish on MGRA and HNLY have been saying that they expect MGRA's recent spending to pay off in terms of increased profits -- that is, that the reason for recent losses has been spending designed to grow the business.

I have never bought the "MGRA's losses are due to expansion" story -- I don't think the financials support it. MGRA's margins also have been shrinking, and are quite thin for software. This is even if you ignore the fact that "cost of goods sold" for MGRA is only the cost of the software, and its "gross profit" does not factor in the labor costs that are part and parcel of the software sales.

I expect next MGRA financials to show continued losses (and will look at financials with especially skeptical eye if the UNAUDITED numbers show some sudden improvement).

MGRA's revenues may increase, but unless it has found some new, higher-margin goods or services to sell, it will just become a larger and larger money-loser. My best guess is that MGRA still is significantly overpriced.

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