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Non-Tech : Radica Games (RADA) -- Ignore unavailable to you. Want to Upgrade?

To: jerald morse who wrote (1639)	1/6/1998 4:13:00 AM
From: chaz	Read Replies (3) \| Respond to of 7111

Gracias, senor. I'll go back to it. BTW, you posted just a few back of a trailing $l.50 after the next report date....isn't that a little slim...that means you're expecting .26. According to my crystals and salts, we're in for closer to .40 - .45. I'm not wildly concerned abt unstocked shelves just now, assuming that sometime during the qtr there will be refills. I'm postulating .40,.40,.75, & 1.60 for the next four Qs...$3.15. One of my common measures is the 30-Tbill, now at 5.7%....based on $l.36 trailing, a "fair" price now (vs 30-year Treasuries) would be $23.75. Since we're at $l5, I judge RADAF to be almost 40% discounted against even the most conservative of measures. That $23.75 represents a trailing 17.5 PE. Current PE is 11. If PE does not expand, then RADAF needs to earn only $2.16 to remain 40 % discounted valued against treasuries. I think that's the worst case. For the upside, suppose RADAF earns $2.50..."fair" would be $43.90, discounted 40% would give us $26.32. (and we'd lose patience with a slow mover). The thing is, this 40% "discount" won't last. The gross margin on a treasury (before tax) is 5.7% today, and headed south. RADAF's pretax gross is almost 10 times that. I lose people with this sometimes, but if I put down $10,000 for 30-yr treasuries @5.7%, I'll earn $570. If I buy 419 shares of RADAF at $l5, ($6,285) I'll earn the same $570 if earnings stay flat. If I expect RADAF to earn $2.50, then I only need to buy 228 shares at $l5 ($3,420) to earn the same $570. I don't use this little exericse to determine which shares to buy, but I do use it to establish how far under or over valued a possible choice might be. If the Fed raises rates, I don't want to be caught in a near or over valued situation. If rates are dropping, (as seems to be the case), the more under valued a stock is, the more it can appreciate, given that it's fundys are sound in the first instance. Hope you guys don't mind this. I learned it a long time ago from an econ 101 prof of mine, and it's kept me out of a heap of trouble through the years. I case you went to the University of Missouri, his name was Pinckney Walker. Chaz.