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Technology Stocks : OBJECT DESIGN Inc.: Bargain of the year!! -- Ignore unavailable to you. Want to Upgrade?

To: Mark K. who wrote (2494)	11/1/1998 6:57:00 PM
From: jimmy c	Respond to of 3194

Did you know IBM owns 12% of Object Design??? (From Hoover.com)

To: Mark K. who wrote (2494)	11/1/1998 9:09:00 PM
From: ahhaha	Respond to of 3194

Earnings visibility is the mean of the product of the ratios of the expected errors in quarterly earnings projections made by outside analysts. Say you make 4 quarters earnings projections. You conclude that in Q(1) a company will earn E(1), +/- e(1)% and do the same for Q(n). Under the assumption that e(n) < e(n+1) you compute V = SUM(e(n+1)/e(n))/n. If you don't have E(i)-E(i-1)>0 for all i, you can't assert any visibility. Also, visibility requires stability such that E(i)=< E(i+1) AND e(i)+e(i+1))=<e(i+2) for all i. The computation is only meaningful for n=<8. For many companies V is impossible because they have negative earnings, erratic earnings, E(i)<e(i), or there is no conviction among evaluators that E(i) is estimable. In general, the larger the company, the more conviction analysts have about computing V. Note that the above ansatz doesn't require that earnings are positive, but they must be increasing. What you have provided is a method for estimating earnings. Obviously visibility is intimately linked with the accuracy of earnings projections, but visibility brings in the conviction level that projections are meaningful. Conviction level requires vision and isn't strictly quantifiable. Only money managers try to establish conviction level, not analysts or CFOs. It is the degree of confidence that is awarded a projection and is reflected in the error estimate. The higher the conviction level, the lower the error awarded. The lower the progressive overall error, the higher the visibility. This can be seen in Zack's mean and standard deviation in various disparate analyst's projections. If the variance is small, the visibility is high and represents another earnings visibility ansatz. Notice that analysts and CFOs shouldn't read other analyst's projections, if they wish to remain unbiased. I might add that earnings visibility isn't necessarily bad or good, because a deviation exceeding the standard error is severely punished or rewarded. In particular ODIS has poor earnings visibility even though top line has high persistence. That's another reason why institutions have dumped. If you are growing sales, but fumble the bottom line, you're out. In the case of positive earnings surprise, the stock pops, but then may sink back down because there is no conviction that the surprise was structural, i.e., an indication of change that will persist so that analysts must adjust projections upward. In that category ODIS isn't to be found. When and if they get into that category, the stock will come out of the base and you may pay up to buy it.