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Strategies & Market Trends : The GUMMMy Bear Squad touting Gum Tech (NASDAQ: GUMM) -- Ignore unavailable to you. Want to Upgrade?

To: Mad2 who wrote (188)	5/20/2000 5:29:00 PM
From: DanZ	Read Replies (1) \| Respond to of 207

You have been saying that GUMM is overvalued for over a year. Originally your argument was based on price to sales, but the ratio has declined from ~14 to 5 over the last year. On what basis do you think that the stock is "richly valued". Based on historic and expected growth rates in sales and profits, I think that GUMM should trade at least 10 times trailing sales, and 12 to 14 is more likely. Here are some facts. Gum Tech is in the Consumer/Non-Cyclical Sector. Measure GUMM S&P 500 Sector Price to sales (TTM) 5.42 7.31 2.80 Price to book (MRQ) 8.06 9.36 10.48 Sales (TTM) vs 1 Yr ago +194.0% +22.2% +3.6% Sales 5 yr growth rate +51.5% +20.0% +5.3% Quick Ratio 3.8 0.6 1.2 Current Ratio 4.4 1.7 1.1 LT Debt/Equity 0% 62% 96% Total Debt/Equity 3% 95% 148% Gross Margin (TTM) 52.7% 49.3% 51.0% Operating Margin 5 yr avg 15.3% 17.0% 14.3% Let's see...GUMM is trading at a lower price to book than the S&P 500 and the sector. Gum Tech's growth in sales is much greater than the S&P 500 and the sector during the last twelve months and last five years. As measured by the current ratio, quick ratio, and debt ratios, Gum Tech has better liquidity than the companies in the S&P 500 and sector. Gum Tech's gross margin in the last twelve months is better than the S&P 500 and sector. Gum Tech's operating margin is about equal to the S&P 500 and sector. And you think that the stock is overvalued? Ha ha, based on what? I believe that Gum Tech's 5 year sales growth is sustainable based on projections for nicotine gum, dental gum, and Zicam, and this doesn't even include any new products that the company develops. To more easily compare the valuation of Gum Tech to other companies, one can normalize the data by dividing the price to sales by the growth in sales. The smaller the number, the less expensive the stock is relative to other stocks. Here is the result of that calculation. Measure Gum Tech S&P 500 Sector P2S/Sales (TTM) vs 1 Yr ago 0.03 0.33 0.77 Relative to Gum Tech 1.0 11.0 25.9 P2S/Sales 5 yr growth rate 0.11 0.37 0.53 Relative to Gum Tech 1.0 3.4 4.8 Based on this measure, Gum Tech is 11 times less expensive than the S&P 500 and 26 times less expensive than the sector based on sales growth in the last twelve months. Based on their five year growth in sales, Gum Tech is 3.4 times less expensive than the S&P 500 and 4.8 times less expensive than stocks in the sector. Of course you could also make a case that the S&P 500 and consumer non-cyclical stocks are overvalued, but you didn't start a thread to bash those companies. Why don't you just admit that you have a grudge against Gum Tech for some reason and that you will never be able to provide any unbiased comments about the company. Regards, Dan