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.

Biotech / Medical : Trinity Biotech (TRIBY) -- Ignore unavailable to you. Want to Upgrade?

To: Scott H. Davis who wrote (9942)	8/2/1998 10:01:00 AM
From: dowman	Read Replies (1) \| Respond to of 14328

This has nothing to do with whether Triby's tax status will change. It has to do with how one values a stream of earnings in the US markets. And the market will "adjust" the valuation to reflect US tax rates. Warren Buffett has been quoted here, so let me add one. He has said to act like you are buying the business, not becoming a shareholder. And a buyer of the entire business would determine what he would pay for the company based on a full American tax rate. I think another problem in terms of valuation is that the margins for this business don't look that good. Gross margins in the low 30's last year and net margins in the last qtr. of about 10% are just not that high. As all of the profits so far are from acquired lines it is fairly obvious that the acquired lines are not that profitable. That is likely the reason they do not break out sales by product line. My guess is that the lines acquired have little or no real growth prospects and were not really in demand domestically. The Triby tax rate was most likely the real factor in the purchase. Not a profitable business for the seller, but adds growth for the buyer. All part of trying to build a business, but the market will "level" for a lower gross margin business. Unless and until there is internally generated growth from higher margin products these will be a hidden but real issues in terms of valuation.

To: Scott H. Davis who wrote (9942)	8/3/1998 9:38:00 AM
From: Steve Stuart	Read Replies (1) \| Respond to of 14328

I side with Scott on this one, although dowman brings up some interesting points. Personally, I value all of my stocks as a stream of future earnings/dividends/etc. I don't "penalize" TRIBY for their low-tax status, although I do "penalize" some U.S. stocks chewing through years of tax loss writeoffs. Another accounting point that is perhaps more relevant in this case: under Irish rules, TRIBY is allowed to capitalize goodwill costs instead of expensing them over several years as a U.S. company would have to. This creates another type of "penalty" that should be applied to TRIBY's earnings when comparing them to those of U.S. companies. Another way of looking at it: many analysts use EBITDA or some such construction to get at the real cash flow behind the reported earnings. For acquisitive U.S. companies, EBITDA is typically higher than EPS. For TRIBY, this difference is not as significant. TRIBY doesn't get penalized in this case, it just doesn't get as big a boost as U.S. companies. -Steve Stuart