To: wlheatmoon who wrote (496 ) 3/23/2000 12:30:00 PM From: John Pitera Respond to
I agree about the ALA complaint....DITC--I have read some very bullish commentary on them, several different times.is one of those companies that has the good fortune to be a supplier of communications equipment to telecommunications carriers at a time when the carriers are spending billions of dollars each year to build out the Internet. jargon-sounding stuff like echo cancellation equipment and optical communications subsystems for high bandwidth data, including wave division multiplexing, or WDM, and dense wave division multiplexing, or DWDM. The important thing: Demand for these products is strong as evidenced by the company?s results since its initial public offering last June. In each of the past three quarters, Ditech has doubled its earnings on a year-over-year basis, results that are good enough to also qualify for the America?s Fastest Growth Company (AFGC) category. But we?re including the company as a Street Beater, because it has consistently beaten consensus Wall Street earnings forecasts by an average 60%. During this period, revenue has grown by an average 274% per quarter, while earnings have averaged growth well in excess of 1000%, once the mandatory preferred dividends from last year?s third quarter are factored out. The primary driver of this growth has been the company?s line of broadband echo cancellation products that, in concert with older products like its 18T1 single-port canceller, accounted for 93% of revenue in the most recent quarter. Simply put, Ditech?s broadband product line has been in demand because of its low cost, ease of deployment and its efficiency at removing distortion from telecom signals. Ditech now counts four of the top five long distance carriers in the U.S. as clients and its market penetration continues to accelerate. 36% share of the echo cancellation market in the most recent quarter, up from 11% in last year?s quarter, gained mostly at the expense of industry leader Tellabs (NASDAQ: TLAB - Quotes, News, Boards). optical subsystems, called the Optical Path, contribute a small, but rapidly growing, stream of revenue. The $2.5 million in sales from the most recent quarter were up approximately 150% sequentially. Management has stated its confidence that the product line will contribute $8 million in sales during the April 2000 fiscal year, which implies that fourth quarter shipments will be in the $4 million to $4.5 million range. worldwide demand for WDM/DWDM products such as Ditech?s optical amplifiers and DWDM Channel Monitor, this business segment will expand as a total percentage of sales going forward. return on invested capital that stands at a 309% annualized rate at the end of the most recent quarter, meaning that Ditech currently generates $3 per share in cash flow for every dollar invested. Not too shabby. On a cautionary note, however, the lock-up period from the IPO ended in January and could lead to some pressure on the shares in the short term. Use any dip as a buying opportunity. considerable upside in the long term due to Ditech?s products, its strong technology and its gains in market share. individualinvestor.com
