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Technology Stocks : Stratex Networks, Inc. (STXN)
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To: Rafael Silva who wrote (683)4/14/1999 4:08:00 PM
From: Rob Preuss  Read Replies (1) of 1762
 
Nice Post... let me repost the table at the end
using a fixed font:

F4Q99E F4Q98A F3Q99A FY99E FY00E
Revenue (MMs) 61.0 93.8 58.3 237.8 307.5
Gross Margin % 24.5 35.4 20.2 21.1 32.2
EPS ($0.04) $0.12 ($0.11) ($0.46) $0.40

This table reflects Prudential's expectations for the
company; i.e., an improving trend in EPS that should
move them into the black next quarter but the growth
next year should be modest (not soaring) to create
EPS of $0.40 over the next 12 months.

At a forward PE of 25, this sort of projection says the
company is currently fairly valued at $10/sh. But the
market is always forward-looking... so, as the year
progresses, the market will start to look out beyond
the next 12 months. Lets look at a hypothetical trend:

F1Q00E F2Q00E F3Q00E F4Q00E F1Q01E F2Q01E F3Q01E F4Q01E
EPS 0.04 0.08 0.12 0.16 0.20 0.24 0.28 0.32

This is a simple straight-line projection consistent with
Prudential's estimates for FY00. I certainly don't mean to
pretend that I can predict EPS as far out as F4Q01, but this
hypothetical table does illustrate the point I want to make:
six months from now, analysts will be projecting significantly
higher EPS over the "next" 12 months (e.g., 0.72) and the "then-
current" fair value will be much higher as well (e.g., $18/sh).
Indeed, if we accept the simple straight-line projections in
this table and use a forward PE of 25, DMIC could well be
trading around $26/sh in 12 months... triple the current price.

Rob
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