Inference Corporation--Growing 100% and still inexpensive Message Board

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Technology Stocks : Inference Corporation--Growing 100% and still inexpensive

INFR 31.99

-0.1%

Jan 27 4:00 PM EST

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To: Adam Smith who wrote (994)	11/18/1998 10:14:00 AM
From: Mike Healy	Read Replies (1) of 1246

Adam, I would not be in INFR to the extent I am (biggest holding) unless I thought it would be a multiple of where it is now... as for what multiple and when, I havent given it much thought. I dont have a model, but..just for the hell of it...here's a conservative (in terms of growth) back-of-the-E-Mail model: 9m Q4-F 1/99-F 1/00-F License Rev 12.1 5.31 17.4 25.8 8% qtrly grwth Service Rev 10.1 3.48 13.6 14.6 2% qtrly grwth 22.1 8.79 31.0 40.4 Cost of Lics 0.6 0.27 0.9 1.3 5% of lics rev Cost of Srvc 5.2 1.74 7.0 7.3 50% of srvc rev Development 3.9 1.40 5.3 6.6 25% growth Sales & Mktng 11.3 4.10 15.4 18.5 20% growth G&A 3.1 0.90 4.0 4.4 10% growth Exp 8.41 38.1 Op Inc. 0.38 2.3 Int & other Inc 0.32 0.3 Pretax 0.70 2.5 Taxes 0.10 0.9 normalize Net 0.60(rounding) 1.6 Shares * 6.8MM 6.8 EPS 0.09 0.24 @ 30x P/E (for 30%+ grower) $7.2 * flat shares-assumes further repurchases offsets dilution..I sure hope. After putting this together, I am a little disappointed.. .thought I would come up with higher EPS next year. I do think its concervative on the growth front...and we could still get an internet-type-hype-spike. But as I look over the numbers and think about the conference call, I do think they will grow marketing and development costs at a reasonable clip (they better if they hope to maximize growth and keep their technology edge)... Note if they grow just 10% faster most of it would fall to the pre-tax line (add perhaps 1.6MM to Net Income...doubling EPS). I guess we really need to do more work on the growth rate...Ill call the company to see what they plan to give analysts in the way of growth-guidance...or perhaps a nice analyst/lurker would just tell us here ...maybe my growth rate is much too conservative...dont care all that much about near term valuation though since I will stay with INFR/Jepson for at least a couple years I think. When will we see real value ? Probably a good lift over the near term..next two quarters since Jepson is now focussed on expanding analyst coverage beyond Ed Bierdeman at Moors & Cabot (there were a number of analysts on the call and Jepson is going to NY soon...). BTW, I doubt Jepson would push to get a bunch of analysts on board if he wasnt confident in current qtr (again consistent with my view that he sandbagged the qtr a little). ...its a start -- as I send this I see INFR up to $6. Yawn.

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