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

To: smh who wrote (1243)	6/27/1998 11:25:00 PM
From: HeyRainier	Read Replies (1) \| Respond to of 1720

[ CTAL ] smh, CTAL's chart looks very good; it just broke out of its "cup," and it could be forming a little "handle" at this area. There is always the danger of this recent breakout failing, and such a development would be considered a Failed Signal, and it would cause me to take a bearish stance immediately. See RADAF for a good example of a Failed Signal called a "Bull Trap." Theoretically, the price could hit $22.00 at this current time (there are theories about price limits being constrained by time, and I generally agree with some of these assumptions). CTAL is technically strong, but from a fundamentalist's standpoint, the stock is expensive-- 99 times cash flow is not a fun figure to see for one's stock. It's also trading at the upper end of its P/E ratio, but then again that's all it's been doing this year--it keeps expanding. And no wonder--it has experienced phenomenal--yet unsustainable--growth. This growth curve will no doubt level as the company's base of earnings expands. Looking at this year's estimates, the company is expected to grow earnings considerably (over 500% relative to the previous year)...to $0.32 EPS. I've been wondering the following: Looking ahead then to the next year, where earnings are projected to grow at a less torrid pace, only 37.5% (to $0.44), if we apply the generally accepted (but perhaps flawed) assumption that a fair P/E multiple is equivalent to a company's future growth rate, then that would imply a fair P/E multiple of 37.5. Apply that to the expected base earnings of $0.32 per share, and you get... a $12.00 price tag. The current price is $17.88. By this measure, the PE-to-Growth "fair value" rule, while currently CTAL's best friend, will becomes its own worst enemy once the company's earnings base is enlarged, and the future growth curve levels. Somewhere between these two levels, a more fair price must exist IMO. Oops. I just thought of something. Onto a new project... Thanks for bringing this up. Regards, Rainier

To: smh who wrote (1243)	6/28/1998 12:11:00 AM
From: HeyRainier	Read Replies (2) \| Respond to of 1720

[ CTAL ] You know, one troubling trend with CTAL has to do with insider sales: biz.yahoo.com You have to go back to 1994 to find one real purchase. Also, looking at the future growth expectations, and comparing it with the future expected trailing twelve months of earnings, on a growth basis, for Quarters 2, 3, and 4 of this year, CTAL ends up having an average fair value of $12.23. So what's the story behind this stock, and what have they done that's made Wall Street so enthusiastic that even growth-based valuation rules don't apply anymore? What is their target market, and how much in sales can they theoretically grab? I saw from the CTAL thread's introductory post that CTAL had a $1 billion market they could exploit. Based on this, the company's market cap is getting close to reaching that (now at around $890 million). Interesting situation here. Regards, Rainier