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Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: DaYooper who wrote (42394)	5/4/2001 12:33:17 AM
From: Mike Buckley	Read Replies (1) \| Respond to of 54805

Rory, I've got some good news for you :) ... SEBL grew fiscal '01 earnings 73 percent over fiscal '00 earnings. Assuming you meant to compare FY00 with FY99, fully diluted EPS excluding one-time gains and charges increased 108%, not 73%, according to the Investorama site I use. Thanks for providing that article. I hadn't seen it and I was happy to bookmark it for the information about the marketshare. I will certainly not attempt to bs you into believing that I have any ability or expertise at projecting the future earnings growth I'm not an analyst either. But I'm still sticking with some numbers that are a lot higher than the analysts are projecting. I'll walk you through them. Most people assumed Siebel's Q1 numbers had tanked. They didn't. Right now, the consensus estimate for FY01 is $.62, about 15% higher than last year's $.54. We've already got $.15 booked for Q1. That estimate essentially assumes that sequential earnings for the next three quarters will be flat. Sorry, but I don't buy it. I think earnings will be better than flat for the rest of the year. Now let's pick on Q2 estimates. Tom Siebel said worst- and best-case licensing revenue scenarios were $280 million and $350 million, respectively. Using a 60%/40% mix for licensing and service revenue, that equates to total revenue range of $465 million to $580 million. Using an 18% operating profit and a 37% tax rate, the range of net profit would be $53 million to $66 million. Assuming no dilution of shares (diluted share count actually decreased slightly in Q1), that nets out to an EPS range of $.12 to $.15. However, at the low end of the revenue the operating profit margin will more likely be about two points lower, resulting in an EPS of $.11, not $.12. Ya gotta feel sorry for those analysts who, thanks to Regulation FD, no longer have more information than you and I do (supposedly). How did they come up with the consensus of $.13 that so neatly splits the range of $.11 to $.15 that I arrived at above? I'm sure they have their models that start at the top line and gradually work to a bottom line. But notice what I come up with, not being an analyst and not using any business model. If I simply use Tom Siebel's estimate that revenue will decrease 10% in Q2, that leaves me with $530 million. Applying the same operating margin and tax rate described above, I get $.13 -- the exact same number as the analysts. So once again, they focused on what Tom said and appear to have juggled their models so they're not inconsistent with him. Where does that leave us? It leaves me thinking that I've done everything I can to figure out the numbers and that in light of falling interest rates I don't see any reason to think we'll have three flat quarters with no growth on average. I'm sticking to my guess -- not much more than a guess -- that FY 2002 EPS will be at least $1.15. That assumes roughly 40% growth in FY01 and 50% growth in FY02, down from my earlier guess of roughly 75% growth in FY01 and 50% growth in FY02. (I won't be picky if it ends up being 35% this year and 55% next year because the end result will be the same.) That's consistent with my thinking that Tom is low-balling the numbers which is consistent with the fact that for the last five quarters -- including the most recent one that was so difficult -- the company beat estimates. Plugging $1.15 EPS into the Fool's PEG, we get a ratio of 2.79. Using that assumption, if the stock price gets down to $25 again, we get an incredible Fool Ratio of about 1.0 for only the second time since I've been following the stock. I'm bookmarking this post, so hold me accountable two years from now about that $1.15 EPS. It's only guess work, but the analysts aren't doing much more than guess work either. If that weren't the case, they wouldn't be constantly changing their estimates. --Mike Buckley