Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : DIGL... Digital Lightwave.... Making Waves.... -- Ignore unavailable to you. Want to Upgrade?

To: Mahesh who wrote (518)	10/16/1999 10:48:00 AM
From: Crossy	Read Replies (1) \| Respond to of 934

Mahahesh, of course I do know this. However investment theory suggests there's a correlation between NET Margin and Price to Sales RAtio. To get a high net margin you got to have high gross margin first. The gross margin of DIGL is 60% interestingly the same as the gross margin for hardware companies like ETEK and JDSU, even higher than theirs. (Ask someone in strategic management about the supply-chain relation effects of gross margins in component businesses - there's a tendency to go lock-step - due to industry bargaining processes...) My hypothesis: Net margin of DIGL will go to 20-30% once their revenue goes up: reason: fixed costs to support company infrastructure and growth (SGA, R&D etc.) goes up slower than revenues. That's my argument for a PSR in line with the DWDM hardware companies.. best regards CROSSY