Table 7
PRICE TO TRAILING SALES RATIO AT QTR'S LOW PRICE
Qtr.
Ended ASND CSCC CSCO NTAP SHVA
Dec-96 11.81 13.51 6.95 5.53 5.19
Sep-96 9.84 13.90 6.16 4.63 6.64
Jun-96 16.96 15.33 6.95 7.18 7.76
Mar-96 14.65 10.50 5.90 7.85 5.47
Dec-95 12.59 8.70 6.48 8.93 5.29
Current Price to sales ratio based on 12/96 sales
7-Mar 11.00 6.39 6.11 8.10 2.07
Table 8
PRICE TO EARNINGS RATIO AT QUARTER'S LOW
Qtr.
Ended ASND CSCC CSCO NTAP SHVA
Dec-96 56 74 33 43 57
Sep-96 45 77 29 33 59
Jun-96 80 87 32 51 72
Mar-96 71 60 27 55 63
Dec-95 61 50 29 222 64
Current Price to earnings ratio based on 12/96 earnings
7-Mar 64 43 33 68 20
Table 9
FORWARD EARNINGS AND 5 YR. GROWTH RATE
ASND CSCC CSCO NTAP SHVA
EPS 1.40 1.10 2.40 1.00 0.78
Grwth 48 45 40 38 30
Product 67.20 50.00 96.00 38.00 23.40
Prem. -24% -92% -88% 7% -67%
Source: Compact Disclosure and brokerage reports
Table 10
MARGIN AFTER TAX
Qtr.
Ended ASND CSCC CSCO NTAP SHVA
Dec-96 21% 18% 21% 13% 9%
Sep-96 22% 18% 21% 14% 11%
Jun-96 21% 18% 22% 14% 11%
Mar-96 21% 18% 22% 14% 9%
Dec-95 21% 17% 22% 4% 8%
Table 11
MARKET CAPITALIZATION
Current ASND CSCC CSCO NTAP SHVA
Shares 111,226 83,682 647,274 15,887 29,636
Price 54 26 51 41 15
Mkt. Cap.
Mill $6,006 $2,176 $33,011 $ 651 $ 445
Source: O'Neal Database for Shares Outstanding
Table 12
DAYS SALES OUT
Qtr.
Ended ASND CSCC CSCO NTAP SHVA
Dec-96 69 88 69 56 73
Sep-96 76 66 58 58 96
Jun-96 77 85 55 43 83
Mar-96 69 67 55 42 71
Dec-95 76 54 60 44 71
Table 13
DAYS INVENTORY
Qtr.
Ended ASND CSCC CSCO NTAP SHVA
Dec-96 33 21 14 44 33
Sep-96 36 25 19 44 27
Jun-96 62 21 27 41 27
Mar-96 83 15 33 38 31
Dec-95 65 21 27 50 24
Table 14
R&D EXPENSE
Qtr.
Ended ASND CSCC CSCO NTAP SHVA
Dec-96 12,652 16,955 167,652 2,383 6,556
Sep-96 10,587 14,727 144,711 1,980 5,974
Jun-96 8,064 12,730 124,184 1,724 5,462
Mar-96 5,495 8,230 89,277 1,660 4,831
Dec-95 4,321 7,506 73,262 1,361 4,553
Table 15
R&D AS % OF ANNUAL SALES
Qtr.
Ended ASND CSCC CSCO NTAP SHVA
Dec-96 7% 15% 10% 10% 11%
Sep-96 7% 16% 9% 10% 11%
Now to the first question. That is whether you could see the Shiva disaster coming in the 3rd quarter days sales outstanding ratios of that company. If you go to Table 12, the answer is sort of. If you look at Shiva's DSOs for the second and third quarter of 1996, you see an increase from 83 to 96 or about 16%. Shiva's stock sold off immediately on the announcement of 3rd quarter results from $55 to $50 and continued to decline over the quarter to about $33 at which time the fourth quarter preannouncement was made and the bottom fell out. It now sells for about $14. Note that Shiva's DSO at the end of third quarter (i.e., 96) was higher than of the other companies listed.
Now, the second question is whether you can infer further declines for CSCC from their DSO increase this last quarter. I don't think you can. If you look again at Table 12, CSCC had a larger comparative increase in DSO's last quarter than Shiva's second to third quarter experience. From the third to fourth quarter of 1996, CSCC's DSO increased from 66 to 88 or 33%. CSCC's stock immediately sold off on that announcement from $65 to $41 and, as we all know, now sells at $26. CSCC has declined about 66% since third the quarter announcement of earnings compared with a decline of 72% for SHVA. The reason that I don't see further declines (unless of course the whole tech area continues to get killed) is that CSCC appears to be a much better company than SHVA at least on paper.
Here is why. Look at Table 2. CSCC has had very high historical sales growth rates. It might be argued that a part of the fourth quarter sales increase was due to pushing inventory out the door. But even adjusting for this, its growth rates are much higher.
Also, look at Tables 10 and 15. CSCC's margins on sales are almost twice those of Shiva. It's R&D on sales is almost 50% higher as well and higher than any of the other companies listed.
Finally, look at Tables 7 and 8. CSCC is currently trading at a price to sales ratio that is similar to CSCO. Consider that CSCC has had much higher sale growth rates than CSCO. Table 8 which shows the historical price to earnings ratios for the two companies does reflect this higher sales growth, but the difference is much less if you calculate P/Es on expected earnings for 1997.
In an earlier post someone accurately compared what's going on here to the product cycles in the semiconductor industry. It's boom and bust. CSCC is currently in a bust and Wall Street is treating the stock like it's going out of business. But if its R&D is solid, it will replace lost frame relay revenue with ATM revenue in a quarter or two and become a darling once more. That's the risk and reward. I hope the R&D is good and keeps them a leader.
Regards,
David |
