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.

Technology Stocks : PairGain Technologies -- Ignore unavailable to you. Want to Upgrade?

To: margin_man who wrote (20901)	2/24/1998 1:02:00 AM
From: Purebull	Respond to of 36349

Article mentions Pairgain: WEEKDAY TRADER: ECI Telecom -3: Cheap In Sector As for its vulnerability to a conflict in the Middle East, a good portion - though certainly not all - of ECI's production capability is in Israel, notes Hank Powell, who follows the company for Southeast Research Partners in Boca Raton, Fla. So the threat of war is a given - and no doubt Saddam Hussein will act up again in the future. Yet even accounting for that, Powell thinks the shares deserve a multiple of 20 times earnings. He predicts that ECI will grow at 20% annually over the next five years, and believes his estimate of $2.45 to $2.50 earnings per share next year is a conservative one. With that in mind, he thinks $40 is a reasonable price target for the stock. What's more, Burnham analyst Silverberg says ECI is sharply undervalued compared with peers like Pairgain Technologies Inc. (PAIR), which sells at 26 times 1998 estimates and at 21 times 1999 projected earnings. Pairgain is expected to grow at about the same rate as ECI this year (though much quicker next year), but it hasn't shown anything like ECI's strong and steady earnings track record this decade. Other better-known telecommunications equipment suppliers that compete in certain businesses with ECI, such as Lucent Technologies Inc. (LU) and Tellabs Inc. (TLAB), sell at 30 times mean 1998 estimates - even heftier premiums. Jonathan Half, a Tel Aviv-based analyst for U.S. securities firm Oscar Gruss & Son, who has a Strong Buy rating on ECI stock, notes that the company's return on equity is now averaging around 24%-25%, higher than the industry's 18%-20% average. (Some analysts regard ROE as a good approximation of a company's sustainable underlying earnings growth rate.) Even using a conservative multiple of 18 times, his $2.05 earnings estimate for ECI, Half argues that the stock is worth $35-$40 a share, as much as a 40%-plus premium to current prices. The market is simply penalizing ECI with too much of a discount, he contends. But with the threat of military confrontation and Asian economic woes easing for now, that penalty could end - and investors may rediscover the value they've overlooked since the crises began. "Dow Jones News Service" "Copyright(c) 1998, Dow Jones & Company, Inc."