I think in PRD you are looking at a fairly valued stock -- what a novelty in this market, eh? -- at or near its 3-year bottom. Value Line projects annual earnings growth as high as 23% over the next four years and a return on investment of as much as 115% by 2001, which could be conservative. It even pays a dividend that is respectable at these price levels (~ 3.2%). So, the downside risk in a maturing, over-valued market seems to me rather small.
As for the past three years, part of PRD's problem has been Asia, part is marketing, and part the so-called digital revolution which leads some analysts to conclude that PRD is being left in the dust of this new technology.
Asia will right itself. As for the digital revolution, I disagree. PRD has digital technology in hand, though not yet perhaps in consumer level cameras. Digital cameras are far from perfected by anyone, anyway, and the market is still fairly small, cheap, and faddish. In any event PRD has a superior R & D department that can if necessary catch up quickly. The company has reorganized in the past three years and according to the most recent quarterly letter from the CEO is just about finished with that.
The remaining issue of poor marketing and really lousy advertising remains to be addressed, but PRD knows this and one must suppose they are addressing it.
There has been substantial insider buying in recent months and a huge share purchase by a party unknown in the past ten days. Some think it was Gillette, and some of those believe Gillette intends to buy PRD. I think it would be a good fit for both, although the market might give G a rasberry as it (erroneously) did with the purchase of Duracel.
At today's closing price just above 18 I think it represents a compelling buy unless you are one of the Internet stock chasers who are looking for a ride to the moon in less than a fortnight. |
