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Technology Stocks : Presstek -- Stock of the Decade?? -- Ignore unavailable to you. Want to Upgrade?

To: SG who wrote (9866)	8/20/1998 6:06:00 PM
From: Brent	Read Replies (2) \| Respond to of 11098

Scott, <please show me the link to what you refer about covering your short position> I think I told you in a PM, but I have deleted all of mine. Anyway, I sold my puts in the middle of July, so it was about 4 weeks ago. It was before it broke into single digits. <When do you think the end of the "difficult period", as management put it, will be over?> I think the 'difficult period' will end when Presstek proves it can make more money. I am thinking you won't see significant revenue or earnings increase for the 3Q, but 4Q could be interesting. I do believe 4Q could be the turning point (if they are going to have one). If plate sales continue to increase and some of these other press/proofers start providing income, I think you could see the cumulative effective take hold in 4Q (which isn't announced until Feb). Scott, you better sit for this part, I do believe these things are going to happen and Presstek will start increasing revenue and earnings in 4Q and beyond. But, (You knew I'd have one of these right) Valuation is the key. Follow me here, I am not a great writer, so you may have to read it twice. Last Q they made .02 on $25m in sales. Now lets use that as a basis for a future quarter, not any quarter in particular, but one say a year from now. Lets assume margins improve so the Q earnings are .04. Further lets assume sales double, now our earnings are .08. Because you'll cry 'that's not high enough! they made more before!', I'll give you the benefit of the doubt, they make .10 a q. Now lets apply a P/E ratio of 40 (more than fair for a company that is growing as fast as you say Presstek will), to the annual (assumed) earnings rate of .40. We now have a projected price of $16. By this simple and more than fair example, there is not alot of upside potential in Presstek based on standard investment ratios. What if margins don't improve? Is it a $12 stock? What if sales don't double? Is it a $8 stock? What if the market goes back to historical norms and the P/E ratio is 25? Is it a $10 stock? Even with the rosey picture, there is just not alot of room to grow. Now all of this goes out the window if Cabot could get the hype machine rolling again, which I doubt could happen twice on the same stock. I think you see where I am going with this. All along I have liked the technology. All along I have been screaming valuation. If in a couple months, the sales are continuing and IPEX went well and it has a decent price $5 - $10, I might go long, but right now, there are too many if's and hopes in it's current price. By the same token, if in the short term it gets back over $15, I will probably go short. Brent