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Technology Stocks : Merrimac (MRM) anyone else follow 'em -- Ignore unavailable to you. Want to Upgrade?

To: Friend who wrote (75)	6/5/1998 8:51:00 AM
From: Friend	Read Replies (1) \| Respond to of 110

10% stock dividend payable today.Hope this becomes the norm.If anybody miss the latest update from insidertrader,here it is.Dave.- 5/18/98 Update #3 $14.88 Estimate Reduced, But Still A Buy. After reviewing some of the assumptions in our earnings model we are lowering our estimate for this year to be more conservative. Merrimac's EPS is extremely sensitive given the company's minute amount of shares outstanding, and we do not think we have taken the possibility of a hiccup in the top line properly into account. Also, Merrimac's spending levels are likely going to increase more than we had previously anticipated. Our new estimates for 1998 are for just under $24 million in revenues, and $1.00 per share in earnings. This is down from the $25.3 million top line and $1.35 per share bottom line we had put in print just two weeks ago. EPS took a particularly large hit in our revision mainly because of the increased expenses we built into our new model. Again, because of Merrimac's small number of shares, all changes in the model are magnified tremendously on the bottom line. The extra expenses being built in are primarily for personnel. New, experienced people are being hired in both Merrimac's sales and R&D departments. Experience costs money, and the extra $150,000 added to expenses in each of the coming quarters by itself chops $0.25 per share from our yearly estimate. The quarter most affected by our change is this coming one. Instead of expecting $6.1 million in revenue and $0.28 per share in earnings, we now only expect $5.7 million in earnings and EPS of $0.22. This is slightly less than the $5.8 million in revenue posted in Q1. Expecting Merrimac's sales to trend up predictably is not reasonable given the lumpiness of its revenues. If just one order doesn't ship on time, it can affect results tremendously. We believe next quarter may be one where this lumpiness affects sales. The revisions in our model could turn out to be too conservative, and we would be happy to be surprised on the upside. We feel a responsibility to stay conservative, however, since there is not a lot of information about MRM available to investors anywhere else. Given the lack of liquidity in tiny Merrimac's shares, we especially think it important to be more conservative. MRM's minute float cannot handle investors being disappointed in one of the company's earnings releases. The good news is that we still consider MRM a buy. Looking at Merrimac's prospects on a year-to-year basis, the $23.8 million in sales and $1.00 per share in earnings we now expect still represents 26.6% and 29.9% growth, respectively. For 1999, we expect Merrimac's investment in sales and R&D to pay off in continuing growth, and EPS should be able to at least reach $1.23. MRM should still be able to rise to $18.50 by early in 1999 by garnering a forward P/E multiple of 15. So despite our more conservative stance on Merrimac's earnings, its stock remains a buy--especially in light of the slight sell off the shares have recently experienced.