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Gold/Mining/Energy : Direct Focus Inc. (DFXI) -- Ignore unavailable to you. Want to Upgrade?

To: freeus who wrote (723)	1/23/2002 2:25:13 AM
From: trilobyte	Read Replies (3) \| Respond to of 768

Mea Culpa Post! Hi Guys, I agree: after further detailed scrutiny the results were very impressive. We were naive in constructing our estimates as we simply assumed the traditional spectacular (30%) sequential revenue growth between Q3 and Q4 of the direct division (mostly Bow Flex although beds are starting to contribute close to 10% now, probably 7-8%). I unearthed the last 4Qs of Bowflex unit sales: 47K, 47K, 51K, 54K. So Q3 -> Q4 growth was only 3K units. Last year, I could find out that Q3 -> Q4 was 10K units. So Bow Flex growth is slowing but not done. In fact, if you believe management, they think (based on other similar products) that there should be no problem selling 2 million units. That means (since we're around 530k units since introduction) that Bow Flex sales are far from over. At 50K per quarter, we have 30 more quarters to go!! Furthermore, the average selling price is up a little (I recall hearing 20$ which means about 1.5%) Q/Q. So all in all, steady though not stellar growth. We also were a little misled by last Q's 4.3 million in Schwinn sales in 11 days. That (linearly) extrapolates to 35.6 millions. However, the commercial division only increased Q/Q sales 29.7 million. Backing out the 4.3 million, we have 33.7 left for Schwinn. But this excludes any Nautilus growth. Let's say Natilus went from 10 million to 15 million Q/Q. That puts Schwinn at 28.7 million, well off our 35-40 million number we had estimated. Why? This was actually in part addressed in the cc: inventories of best product lines were too low as Schwinn was just getting out of bankruptcy and all the agreement with old suppliers had to be re-established. The other reason I see is that Schwinn products were probably pushed hard to the to refill the channel last Q as soon as the company came out of bankruptcy. Company forecasts revenues +40% in 2002 vs 2001 and earnings per share +30% vs 2001. That would lead to eps number of 2.41$ and revs of 510 million. At current share price of 34$, we have a dismal forward p.e. of 14.1 and forward price to sale of 2.3. And lets not forget DFXI is one of the most conservative companies out there. It is clear that DFXI rates of growth will slow now. But how significant is this? DFXI was never valued like a fast grower with 50+ p.e. and 10+ p/s. I believe DFXI should hit 50$ on a p.e. around 20. That's a 50% gain from where we are sitting. And all this analysis excludes: step master contributions to the bottom line. Remember that this acquisitions is cash based. It's accretive to shareholders in a major way since it doesn't dilute the share count. best of luck in your decision. I hope this helps, Trilobyte.