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Technology Stocks : Continental Circuits (CCIR) -- Ignore unavailable to you. Want to Upgrade?

To: Dana Breite who wrote (43)	11/25/1997 11:08:00 AM
From: rich evans	Read Replies (1) \| Respond to of 54

Yes, the report was fine and the outlook fine. The interesting thing about this stock is that with 7.55 mil shares out and net margins of .755 when gross margins equal 19.5 the revenues are the same number as the earnings per share. So next quarter the margins are going up so 38 mill of rev should be .38 cent. Q3 margins should retreat according to conference call so about 42 mill should equal 39-40cents a share. But in Q4 they indicated a run rate of 170 mill amd better margins again so I am looking for 42-43. So earnings for year should be solid at 1.50 to 1.55. The Dynaflex purchase though is just a start. It is very small and a quickturn flex facility only without the new flip chip on flex technology to design into. They figure they can double revenues by spending 1mill cap ex but after that what. They will need to expand and get into the volume flex assembly business and that would be expensive and difficult so I look for an acquisition after they get their feet wet with Dynaflex. Candidates? how about SFLX? Also at year end they with be back up to over 85% cap utilization when they reach the projected run rate of 170 mill so once again will need to expand. The problem with this industry is that the growth keeps causing expansion with the disruption in margins from new facilities and ramping up new plants as costs come before shipments and can't coordinate labor costs so we keep getting margin problems as part of expansion. Look at PGTZ as the best example. It is growing fast but can't deliver to the bottom line. CCIR is much better at this. Their growth is slower but they keep the profits coming and debt under control. Debt will be at 25mill according to conference call for Q2 with interest payments of 300,00 for Q so it is easy to figure profits. Tax rate stays at 38% and SGA is steady at 6% of revenues. Hope this info helps. A very solid company. But the PE probably won't get over 18 in my opinion.So I see mid 20s in 1998 and not the 30 some mentioned on this thread. Rich