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Strategies & Market Trends : Low Price/Cash Ratio Value Stocks -- Ignore unavailable to you. Want to Upgrade?

To: Elroy who wrote (345)	2/16/2000 4:58:00 PM
From: Q.	Read Replies (1) \| Respond to of 1931

re. valuation of TSFT after the buy-back, don't forget that earnings will be diminished by a reduced interest income. With all the cash they have, interest income was representing a a good chunk of their eps. Over the last 9 months, interest income was $448 k, while income from operations was $573 k. If the buyback happens at 7 1/2, it will essentially eat up all their cash, so their interest income will go to zero. I don't know what their effective tax rate will be, but if it remains flat, their net income will drop about 44%. Shares outstanding will drop up to 62%. The net effect is that the eps will change by a factor of (1-.44)/(1-.62) = 1.5. They earned 0.32 in the last 12 months, so that will mean the new eps will be about 0.48. The p/e at 7 will be 14, while at 4 it would be 8.