Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : The Rational Analyst -- Ignore unavailable to you. Want to Upgrade?

To: Chris who wrote (131)	1/8/1998 3:07:00 AM
From: HeyRainier	Read Replies (1) \| Respond to of 1720

[ SOCR ] Hi Chris, There was an email I sent to Scott Davis in late 1997 regarding SOCR and its earning history. I'll post it here so you can see my opinion on the stock: * * * Subj: SOCR Date: 11/30/97 Business Overview for Scan-Optics: Scan-Optics designs, manufactures, and markets document scanning, imaging, and optical character recognition (OCR)/intelligent character recognition devices (ICR). The company's products include the Series 7000 Network Image Scanners and the Series 9000 OCR/ICR scanners for high-volume imaging. Its UNIX-based postscanning systems offer verification, image storage and retrieval, and document management. The company's products are used by subscription and catalog fulfillment companies, manufacturers, government agencies, financial institutions, and health care companies for processing items such as credit card sales drafts, mail-order forms, federal and state tax forms, automobile registrations, shareholder proxies, and payroll time cards. Balance sheet items: The company's balance sheets are very strong. It has no debt, a current ratio of 3.05, and a return on equity of 24.8%. Based on Friday's close of 8 7/8, the stock has a price/earnings ratio of 11.2. P/Book is 2.36 and P/Sales is 1.10. From 1991 to 1996, the company grew earnings by 43.7% on a compounded basis, and so far for 1996 vs. 1997, the company's earnings have grown at an average rate of 167%. Despite these fantastic numbers, I hold some major concerns about the company: the earnings growth is extremely erratic; there appears to be little to no true earnings stability. Earnings are up one quarter and down the next. From 1991 to 1997, if you compare all the up-quarters versus all the down-quarters, you will find that the number of occurences are exactly even. But to the company's credit, however, goes the fact that it is experiencing the longest streak of positive earnings growth in its history. No analysts are covering this company, nor are there earnings projections drawn out for it. Standard linear regression analysis-based projections don't help much here if you are a starry-eyed bull. Reversion to the mean is not an attractive development for this company, but the said linear regression forecasts show that this company will earn $0.25 for the fourth quarter of this year, down from $0.31 from the year ago period. I don't place too much emphasis on the forecasts, but with such an erratic history of earnings growth, it is all we can go on. The growth numbers are based on information provided from 1996 to 1997, the strongest earnings growth streak for the company. Allowing for the entire earnings history of the company, the forecasted EPS for the fourth quarter goes down to $0.12. I once thought the situation here looked like Equinox revisited; however, a deeper look at the situation here does not provide me with an equivalent amount of certainty that I once had with EQNX. The technical characteristics of the stock are unattractive, and I would not recommend a purchase based on current timing. It is fast approaching firmer support at 8, however. Until the price weakness firms up, I would recommend staying on the sidelines. * * * There you have it Regards, Rainier