I have to agree with Tim, you are totally off base. You are trying to sidestep the 1998 train wreck in your analysis. (not to mention you are comparing a small cap stock to a large cap index, wouldn't the Russell 2000 provide a better comparison, huhn?)
It does not matter how many fancy investment terms you want to throw at this, you can't obfuscate one simple and important fact:
TMSR Net Income
1995: 1.43
1996: 2.26
1997: 3.20
1998: -9.06 !!!!
(A loss greater then the income of the combined 3 prior years!!!!)
With a loss as big as that, the earnings from the prior years become VERY SUSPECT.
Let's be clear here, many companies in order to fool Wall Street (and enhance the CEO stock options), use tricks to make the bottom line look better then it is. Sometimes hiding expenses and then writing them off in huge onetime write-offs, like GT Interactive did. Sometimes they use overly aggressive accounting of revenue like Chain-saw Al did at Rubbermaid or CUC before it became part of Cendant, or stuffing the channel like Compaq did last year.
There's not lot of transparency with small caps, the limelight does not shine on them the way it does on the large caps. CEOs/CFOs of these small caps have more discretion, and if they are doing some tricky accounting, they will be able to get away with it, for a longer period of time. (it is also because the of this lack transparency, that small and micro caps are easily manipulated by hucksters.)
A day of reckoning comes, the company reports huge losses. Sometimes the CEO is dumped and a new guy is brought in to "FIX" the problem. However, there wasn't a problem at all... it's just that the company wasn't growing as fast as investors were led to believe, simple is that. Sorry about that people, your stock is worth half of what was the day before the pre-announce, have fun averaging. (you know the drill...)
Maybe TMSR used some fancy accounting to make 95-97 look better then it was, maybe not.
But I have a feeling Mr. e, you will tell me they did not...
- Chris |
