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Microcap & Penny Stocks : Transnet-TRNT
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To: Scott Mc who wrote (128)2/27/1997 9:36:00 PM
From: Byron Angel   of 140
 
Scott,
I wouldn't rely too much on the P/S ratio for TRNT. Much of the company's sales are PC's. They used to make money on these sales but now they are essentially zero margin. The company just wants to be able to offer the customer one stop shopping in setting up a network and uses its capability to sell PC's to get in the door to offer its network services which is where they now make their money. The hardware sales add quite a bit to the company's revenues but very little to earnings and so the P/S ratio is a bit deceptive. The networking services revenues are much more stable so in the future I don't think you'll see the kind of fluctuations in earnings that occurred in the past which is obviously a plus.

To me what makes the stock so attractive is that the PE is so low in comparison to what we are going to see in earnings growth. The only question is how many quarters of increasing earnings we need before the stock begins to move. The market initially reacted very favorably to the Q4 96 earnings but then the stock seemed to sell off along with Cisco and the other companies that sell networking hardware. Since TRNT sells networking services not hardware the recent decline in the stock doesn't make much sense but does present a buying opportunity. I'm expecting another good earnings number for Q1 97 so maybe this will be the one that finally turns this stock around.
Byron
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