Brian,
Personally, I liked most of what I heard. IMO, CREAF is executing relatively well in a very tough environment. Until, I see otherwise I am going to continue to assume that this was indeed a transition quarter and that with a high end audio cards back in the mix, earnings momentum will turn north.
Did you catch the part about inventory getting in line? Earlier they had stated that they thought it would take a few quarters to get inventory back to a desirable level. Apparently, they were able to get there in just one quarter. Turns were also up.
Cash continues to flow in and the balance sheet looks great.
Contribution from video products (mostly high end) is growing rapidly. In fact, I think we can assume had it not been for significant growth in this area....CREAF would have been hard pressed to post a profit.
When sound cards returning to the scene as you pointed out ("Audio, currently at 34.4% of revenue, is expected to represent 40% next quarter."), things should start looking up.
As they pointed out more than once, they can not control macro economic issues, but from a product line perspective, the company has never looked better.
I think we will have a very good idea of where the company and stock are heading within the next six months.
I did like someone's suggestion on this forum, I believe, of consolidating the industry. IMO, this would be a great use of cash. Heck they could just about buy TDFX and DIMD outright with their cash stash. It's also a shame that they can't use some of that stash to pick up their own shares at a bargain basement price tomorrow (if the market acts irrational and tanks CREAF further).
CREAF's financials and the current valuation just don't add up. These kind of disparities don't last forever. Something will give eventually. Either fundamentals will weaken dramatically to justify such a low valuation. Or the valuation will increase to catch up to the fundamentals. Heck, the trailing P/E (including what should be the trough quarter) could easily be less than 5....and all this time they are still making money and generating good cash. Oh well....we'll see......like I said, six months should tell a lot.
Good luck,
FF |
