Mackie Designs (MKIE) Message Board

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Non-Tech : Mackie Designs (MKIE)

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To: nasdaqian who wrote (20)	12/26/1996 8:37:00 PM
From: Stingray	of 61

> Why not detail the analysis here? There's nothing else going on? > Bruce OK here's the condensed version. Consider this to be "thread food" I welcome any comments/criticism. The last quarters results really scared away a lot of investors because revenues and profits were both down. If this signifies a trend towards declining profits then even at 6 the stock would be overpriced. The new products help out but don't make up for the revenue lost and earnings per share are 50c in 1997, the stock trades for a mere 8x earnings at $4.00. Let's call this scenario A. Scenario B is a middle of the road scenario where the declines in sales in the last quarter were due to a combination of competition and seasonal factors in equal amounts and the the new products account for 25% of sales in 1997. The average quarter in 1997 has $17.0 million from existing products and 5.7 million from the new products, EPS 19c, total earning for the year 76c. Based on a 10% growth from 60c per share in 1996 (which has yet to be seen) the stock trades at 10-15x earnings or $7.50 - $11.00. Scenario C is like B except that the new products make up 33% of 1997 sales, sales of existing products hold steady at $18.0 million per quarter, with new products weighing in at 9.0 million per quarter with EPS around $25c. The company earns a dollar for the year, up more than 50% from the earnings for 1996. Wall street sees the stock as being in the fast lane and it trades for 30x earnings or $30.00 I put these three scenarios together as a pessemistic, neutral and optimistic view of the year ahead. Personally I think 'C' is more likely than 'A' but 'B' is more likely than either of the other two. So here are my two big unanswered questions. a) To what extent was the drop in revenues in Q3 due to seasonal factors. Clearly the more the seasonal effect the more the bounceback in Q4. b) How much will the new products contribute to revenue in 1997? When the Q4 numbers come out they should resolve question a), at least if a breakdown of revenue between existing and new products is identified in the teleconference. The revenue from new products in Q4 is going to be much harder to extrapolate and as of today I don't know for sure that any of them have shipped but I'll make some enquiries on 12/31. The difficulty in extrapolation is because a) there is a backlog of orders and even if a new product doesn't reach the stores until the last week in December it will still be invoiced and count towards Q4 revenue ( correct me if I'm wrong here). Second the number of units shipped may not reflect what Mackie can manufacture rather than what is on order. I don't consider this to be a professional analysis but rather a starting point for discussion. I'm considering buying more stock but will probably wait for the Q1 results to come out first. Has anyone seen any of the new products in the stores?

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