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Technology Stocks : DOCS - A TURNAROUND PLAY -- Ignore unavailable to you. Want to Upgrade?

To: Kevin Firth who wrote (462)	6/12/1998 3:35:00 PM
From: Sultan	Respond to of 1156

I'd say this report is in the positive category. They seem to be cleaning up few things, such as expensing instead of capitalizing and the tone of the comments have changed.

To: Kevin Firth who wrote (462)	6/15/1998 12:20:00 AM
From: Ally	Read Replies (1) \| Respond to of 1156

Thanks for posting the news. It was especially timely for me since I just finished my own analysis and was able to compare to the news. >>TORONTO -- PC DOCS Group International Inc. (DOCSF) expects to earn 3 Canadian cents to 5 Canadian cents a share in its fourth quarter, on revenues of C$39 million to C$40 million, chief financial officer Dennis Moir told Dow Jones.<< My numbers show the current year to end up with total revenue around $128 million. Next year, conservatively, total revenue is estimated at around $166 million, a 30% growth, compared to 33% growth this year. >>Moir said fourth-quarter earnings will be below the third-quarter net because the company is expensing more costs, rather than capitalizing them.<< Typical happening whenever a company gets a new CFO...new finance executive tends to take substantial charges and start off with as clean a book as he can get away with. It's good news, 'cause next fiscal year, the new numbers will pop earnings significantly higher, and pushing up the stock price higher. According to my numbers, the new CFO is expensing about 7 cents/share in the 4th quarter toward special charges. Without all the special charges this year, the eps would be about 30 cents/share. Next year, estimates show earnings of 60 to 70 cents per share. Gross margin was a whopping 93% in 3rd quarter this year, compared to 86.5% average last year. Positive indication to see gross margin for current year at average 89% compared to 86% for last year. The expense to revenue ratio remains problematic. This is one area where hopefully the new CFO will have the guts to stand firm and tell Rubin to cut down the fat in general expenses. Marketing and sales expenses need also to be more in line with revenue growth. When you look at the numbers, you can easily see where the problem lies. For fiscal 1996 (when the stock reached its record high of $33), total expenses were 57% of revenue. In 1997 it was 71%. This was the main reason for the dismal earnings and the stock price plummeting down to a low of $7.00. For this current year, the expense to revenue ratio is still very high. It is estimated to end the year at 75%!!! Come on Rubin, surely you can see where the problem is. Cut down on your expenses honey, and make our day! >>Duncan Stewart, partner at Tera Capital Corp., said generally, observers expect PC DOCS to earn about 70 Canadian cents a share in fiscal 1999. He said the price targets on the stock are about C$17, based on 20 times expected fiscal 1999 earnings and C$3 a share of cash the company holds.<< I have a more conservative price target within the next 12 months of $15, however, we'll take the $17!