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Technology Stocks : Advanced Digital Information Corp. (ADIC) -- Ignore unavailable to you. Want to Upgrade?

To: Z Analyzer who wrote (1978)	5/26/2000 12:44:00 PM
From: The Ox	Read Replies (1) \| Respond to of 2283

Just to play devil's advocate, what was ADIC's share price during the time of very strong growth? Honestly, I don't care what the price was. You appear to be looking into the rear view mirror to justify what's happening in front of you! <gg> Let's start by looking at the year over year revenue growth. It was 46% when comparing the last 4 quarters to the previous 4 quarters. Now, let's compare earnings during these 2 year periods. The previous year's(4 seq qtrs) combined earnings were roughly 10 cents and the last 4 quarters have produced 47 cents in earnings. EPS growth was 370% over the previous period, yet the stock is now trading at a 25 trailing PE. I would say that these numbers don't add up and that's why I believe that there is solid value at the current price. While revenue has been slightly disappointing lately, the EPS generated has not been disappointing which shows the company is still efficient and has been focusing on the bottom line. I'm not a huge fan of using analyst future estimates but for the sake of this post I think we should look at where they are at. Next 2 quarters are currently showing 14 and 15 cents. Simply for discussion purposes, let's assume that ADIC continues to beat estimates by a penny per quarter and that they continue to grow sequential EPS by a penny a quarter. We extrapolate a 66 cent expectation for the next 4 quarters and compare them to the 47 produced previously, showing EPS growth rate around 40%. Using a traditional valuation model (40 x 0.47) we get a price target of $19/share or (40 x 0.66) $26/share on future earnings. If one discounts EPS, the growth rate, or both, we still find the numbers make the current stock price look reasonable. Each day that goes by the stock is looking even more reasonable <gg>. ...like a stone in water... The above makes the following assumptions: that business will continue to be solid, that the new product just released will generate substantial interest, that management continues to focus on margins and cost savings, that their investments 'do well', that they won't need to dramatically change their business model (like increasing commissions, discounting their products, etc...). I welcome alternative opinions. There may be many things on the horizon that I haven't taken into account and I encourage others who have issues and information about ADIC's future to post them here so we can all learn. Best of luck, Michael