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Technology Stocks : Phoenix Technologies (PTEC)
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To: Tim Oliver who wrote (448)2/3/1997 10:58:00 PM
From: Fred Fahmy   of 3624
 
Tim,

I'm sure you could care less about my opinion but I will give you one of my picks. USRX.

IMO, this is one of the most signficantly and obviously undervalued stocks around.

Here are my key reasons.

1. Forward looking P/E between 19 and 20 for a company which has had sustained EPS growth of more than 40% for last five years. Last year's growth rate was well over 100% but we'll call that an anomoly. At any rate, nothing to suggest that 40% growth rate cannot be maintained or improved going forward.

2. Although USRX is thought by many to be just a modem company, they are anything but just a modem company. While it is true that they are the world's leading modem company and have continued to gain market share in the face of increased competition, it is also true that they have an extensive product line most of which are much higher margin products than commodity modems. This is why they improved margins from 1995 to 1996 and why management has given guidance that margins will again increase in 1997. Product mix is shifting rapidly towards higher end products.

3. Average (and USRX's growth is anything but average) P/E for USRX's industry segment is around 30. USRX has traditionally been able to support P/E's of over 40.

4. Leading edge products and technology.

5. Strong management which has provided excellent guidance for projecting future earnings. Management is comfortable with analyst's readings of this years financials.

6. Future growth strongly tied to internet growth.

7. Great brand loyalty and new marketing focus on even further increasing brand awareness.

There are many other reasons but these are the first that come to mind. My 12 month target is between 120-140. Most analysts have a target over 100 and Oppenheimer has a target 130-140.

Not small cap and not for the faint of heart due to volatiliy but I real bargain in my opinion.

FF
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