Sapiens International Corporation (SPNSF): Turn around...? Message Board

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Technology Stocks : Sapiens International Corporation (SPNSF): Turn around...?

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To: uu who wrote (1797)	10/29/1998 12:20:00 PM
From: Joseph Strohsahl	of 1936

FROM: Hambrecht & Quist Sapiens Reports Strong Third Quarter Results. Growing Demand For Euro Solutions Poised to Deliver Upside. Reiterate STRONG BUY Hambrecht & Quist Sheila B. Ennis October 29, 1998 Synopsis Sapiens reported strong third quarter results, with revenues growing over 75% and operating income up over 135%. Revenues of $18.9 million and earnings of $0.12 were well ahead of our $16.9 million and $0.08 estimate. Importantly, non-Year 2000 sales grew roughly 33% in the quarter. This not only serves as testament to the underlying strength and longevity of the business, but speaks to the global trend among companies worldwide to outsourcing mission-critical development needs -- a trend we expect will fuel accelerating demand for Sapiens' solutions. Factory productivity increased 50% in the quarter to 120k lines of code per employee per month. This metric is critical in assessing Sapiens' ability to execute on its ever growing stockpile of Year 2000 backlog and this 50% sequential improvement is tracking well-ahead of our expectations. As we've highlighted in our previous reports, the Sapiens Euro solution is currently in pilot stages with several substantial customers and we believe will be the source of considerable upside as these customers move from pilot project to full implementation over the next several quarters. We are raising both our fourth quarter and fiscal 1999 estimates to reflect the growing strength of the business. We have raised our fiscal 99 revenue estimate 5% to $86 million and our earnings expectation roughly 10% to $0.56. With the core business growing over 30% in the quarter and the Euro solution experiencing ramping demand, we believe our new numbers, which reflect 25% growth, remain conservative. Recommendation We reiterate our STRONG BUY rating on Sapiens. Our new calendar 1999 expectations call for 25% sales growth and over 38% earnings growth as operating margins continue to expand. With shares trading at a meager 12 times our conservative calendar 1999 earnings estimate of $0.56, we believe the stock is significantly undervalued relative to the opportunity.

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