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Biotech / Medical : Arterial Vascular Engineering AVEI -- Ignore unavailable to you. Want to Upgrade?

To: Scott Overholser who wrote (387)	10/27/1998 5:01:00 PM
From: mmeggs	Read Replies (2) \| Respond to of 410

"Crush" is a relative term. Consensus estimates for AVE were at .70. They reported .80. That is nearly 15% higher than anyone expected. To many, that is a "crush". To you, perhaps not. It would seem that the market agrees with you rather than me. I do find your implication absurd. (I don't find you absurd, I don't even know you. Don't get mad.) Your earlier post implied that because the margin by which AVE exceeded estimates had decreased, that the stock justifiably traded down. Instead of generating 20% more profit than expected, it was only 15% higher. What you seem to be saying is that because the analysts publishing estimates did not underestimate the quarter's profit by quite as much, one should sell the stock. Microsoft routinely exceeds consensus expectations by a penny or two. In the most recent quarter the surprise was seven cents. (.49 vs. 56 reported). By your logic, should Microsoft post less than a seven cent "surprise" the stock should trade down. Yes, that seems absurd to me. I don't make any claims of omniscience. By several accounts, the company worked to get the reported number DOWN to .80. I know personally that this was true for the previous quarter as well. It is now selling at less than half the multiple of Guidant, a quarter the multiple of Medtronic, and a third that of Boston Scientific. With growth rates comparable to or exceeding those companies. These are larger and more diversified companies and deserve higher multiples. But the degree of disparity to me is overdone. It is true that revenue declined sequentially. This was expected as Boston Scientific received approval for the new Nir stent, and it was obvious it would take market share from both Guidant and AVE. And indeed it did. This was not news. Eventually, it is generally conceded that the pie will be divided into thirds between the three companies. But it is a growing pie. (On a quarter over quarter comparison, the growth in revenue and earnings was 600% and 800% respectively.) They've got a good product pipeline, the balance sheet is squeaky clean with over $200 million in cash sitting there, and they have made smart aquisitions. Their technology is excellent. What gives? BTW, I am long the stock, and have clients who are long as well. Best regards, mmeggs