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Challenge issued to any NN shareholder.
by: DownOnWallStreet
7223 of 7236
I challenge any shareholder of NN to state in concise fashion why they believe NN is a "Buy" or "Hold" at
this point.
I have sold my shares and here's why:
1. Revenues and earnings are unpredictable and show no consistency and we know the market does not
appreciate that.
2. The stock has had a remarkable runup and at present the valuation on this stock, despite the correction of
the last two weeks, well ahead of the fundamentals.
3. There is no certainty that the company can show stable revenue and earnings growth over the next year that
would justify a growth PE.
4. The stock is already trading at a PE of 30 based on forward earnings and that is simply too high for a
company that is inconsistent and where earnings are not growing. A more conservative PE of 20 should be
applied because NN has not demonstrated an ability to grow consistently. That makes NN a US$20 or US$25
stock at best.
5. The company has stated that they WILL NOT be able to recover the lost revenue and earnings going
forward in spite of glowing statements about growth of their ATM line. This displays a serious flaw in their
strategy and execution.
6. The company stated in the past year that it forecasted strong demand in ATM sales, yet they totally
mismanaged this growth and missed their own sales targets. This indicates very serious internal problems
that are ABSOLUTELY unacceptable for a growth company. If you want the market to view you and value
you as a growth company, you must be able to deliver that growth. Any failure in managing that growth,
whether forecasting, inventory control, production, distribution, scheduling etc., is no excuse. It is a failure of
managment, and indicates a very serious shortcoming at upper and mid-management levels. Frankly, Lutz is
not all that special a manager, his reputation far exceeds his skill level. The G1 blunder was a sign of things
to come.
7. The company has difficulty managing growth but must also manage growth accompanied by declining sales
of legacy products. This requires very nimble managing which NN obviously doesn't have. It is difficult
enough to manage strong growth, try doing it when you are distracted by falling sales in a core product. You
want to talk about inventory and production problems?
In conclusion, I would have to say that it is difficult to argue for holding this stock under the present
circumstances, it is even harder to make a case for buying NN. When you add to this the fact that the tech
sector is ripe for a correction and the overall market is wobbly, NN is a risky hold.
My advice would be to avoid the stock if you don't own it, sell it if you do own it. There could be an
opportunity to buy in the coming months at a much lower price.
Posted: Feb 8 1999 10:33PM EST as a reply to: Msg 7222 by tradersdig
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