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Technology Stocks : Gateway (GTW)
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To: Skeeter Bug who wrote (6990)1/21/1999 6:10:00 PM
From: Kory  Read Replies (2) of 8002
 
sb,

<<so gtw is RELATIVELY more reasonable than most...>>

I can finally agree with you 100%. It's what I have been saying all along. I don't find many cheap stocks out there these days, especially in the last 90 days or so, and I really don't like this high priced market. But, I have always failed to see why you and tippet were so insistent that GTW was radically overvalued.

Given the earnings today, GTW has trailing 12 month earnings of $2.18 which at a price of $58 calculates into a PE of 26.6. EPS growth in the 4th quarter was 37%. If I go back to 1996 earnings, we have compounded annual EPS growth of 17% since then. So we're trading some where in the middle of the 1996 PEG and this year's 4th quarter PEG. Pretty reasonable IMO.

The really good news is the cash. Cash flow excellent again - in the 4th quarter cash was up $325 million (over $2 bucks a share) to over $1.3 billion on hand. Inventories down from the 3rd quarter $198 million to now at $168 million. Looks like interest income up to $14 million for the quarter, which means GTW will be over $50 million a year (before tax) from here on out.

Can't see a lot of exposure in the balance sheet - looks like a rock solid quarter to me. I'm sure that people will fret over the ASP's again, and the lower than 20% sales growth in the U.S. Could really care less and hope the market beats GTW back to $40's. Would love to get a discount on my next purchase.

Kory
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