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Biotech / Medical : Novacare (NOV) breaking out...
NOV 15.67+0.8%3:59 PM EST
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To: Steve Baker who wrote (335)10/10/1998 9:53:00 PM
From: Kelvin Taylor  Read Replies (1) of 420
 
Steve-

I think what Todd is saying relates to two things. First NOV is going to report lower earnings. In this market there is absolutely no tolerance for disappointment. Since the numbers are going to be 50% less than last year, the belief among the larger investors (mostly institutions) is what happens next quarter? Is this a prelude to a string of lower earnings for '99? The answer to that question is still unknown. Still the PE is very attractive compared to many other stocks in the same industry.

The second reason for the decline is overall dislike of small cap stocks. They have been beaten unmercifully for quite some time. My guess on the stock is most if not all of the bad news has already been factored in the price. At 2.5 a share and the same with the PE, it's not likely to remain a low price stock for a prolonged period of time. The concern I have is will the stock trade in a narrow range until the next quarter is finished. I don't know so right now I'm on the sidelines watching, but not buying. I want to see how the stock reacts at the time earnings are announced.

It is, however, worth remembering that if a company pre-announces bad earnings the stock takes an immediate hit then recovers some when the numbers are actually released. Will that happen this time around? Just depends on how the market is behaving when they talk.

Good Luck,

Kelvin
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