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Non-Tech : NATIONAL RECORD MART (NRMI)
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To: kgreen who wrote (26)12/8/1998 9:24:00 AM
From: Ginco   of 34
 
NRMI represents the best-undervalued opportunity in the group when comparing Earning Per Share (EPS) estimates, Market Capitalization, and PE. Let's have a look:

1) CDNOW INC (Nasdaq: CDNW):
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Stock price: $19 7/8: up +$2 15/16, (+17.34%).

Consensus Estimates (EPS): This Year (Dec 98): a loss of -$2.83. Next Year: a loss of -$2.91.

Market Capitalization: $351.3 Million. Shares Outstanding: 17.7 Million shares. Float: 4.10 Million shares.

PE: Not applicable due to expected losses.

2) TRANSWLD ENTMNT (Nasdaq: TWMC):
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Stock price: $23 ¾: up +$2 (+9.20%).

Consensus Estimates (EPS): This Year (Jan 99): a profit of +$1.11. Next Year: a profit of +$1.34.

Market Capitalization: $777.5 Million. Shares Outstanding: 32.7 Million shares. Float: 12.1 Million shares.

PE: 23.75 / 1.34 = 17.72.

3) NATL RECORD MAR (Nasdaq: NRMI)
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Stock price: $9 1/16: up +$7/8 (+10.69%).

Consensus Estimates (EPS): This Year (March 99): a profit of +$0.60. Next Year: a profit of +$1.00. (The WSJ estimated that next year earnings could go as high as $1.47.)

Market Capitalization: $43.0 Million. Shares Outstanding: 4.75 Million shares. Float: 3.40 Million shares.

PE: 9.16 / 1 = 9.16.

PE according to the WSJ estimates: 9 1/16 / 1.47 = 6.16.

It is clear that when comparing EPS, Market Cap, and PE, NRMI is grossly undervalued at these prices. Also, please remember that TRANSWLD ENTMNT already opened their Internet stores. NRMI did not. Any additional revenues and EPS from Internet business would increase NRMI future earnings and would also reduce their PE even further.

If we try to calculate a relative fair price for NRMI by comparing it to TRANSWLD ENTMNT on a PE basis, we would receive a price per share for NRMI of:

17.72 x 1 = $17.72,

or 17.72 x 1.47 (according to the WSJ estimates) = $26.00.

$26.00 per share would also be a fair takeover price for NRMI in our opinion
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