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Technology Stocks : Vitesse Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: Thai Chung who wrote (2082)	12/8/1998 9:26:00 AM
From: RDR	Read Replies (1) \| Respond to of 4710

Here is an interesting view on VTSS price move from an article appearing in the Microsoft Investor: Has anything changed in Vitesse's fundamentals? Well, yes. After a year of unbelievable growth, Vitesse looks set for a year of merely great growth. The company's revenue, which had climbed by 67% from the year-earlier period in the June quarter, rose 75% in September; earnings, after jumping 50% in June, climbed 62% in September. This caps a growth explosion at Vitesse -- the company grew earnings per share by 57% in fiscal 1998 and 100% in fiscal 1997. Next year, though, analysts are projecting only a 20% earnings increase, to 85 cents a share, in part because they feel the big expansion in manufacturing capacity that Vitesse got this year when it opened its second factory is over. I think the projection is low, and that the company will continue to increase its profit margins and to wring additional capacity out of its factories. So I'd put earnings growth for calendar 1999 at 35% -- to 97 cents a share. But for a stock trading at Vitesse's price-earnings ratio -- currently 62 -- a drop from 60% growth to 35% growth is very dangerous. When I set my $40 price target for the company, I used a P/E ratio of 53 -- slightly lower than the company's earnings growth rate. I wouldn't give the stock a higher P/E ratio next year on lower growth. Using a P/E ratio of 50, which is still pretty generous, I get a December 1999 price for Vitesse of $48.50 a share. That's only about $6 above the stock's current levels. So for me, Vitesse goes down as a sell. I'm dropping it from Jubak's Picks with this column with a gain of 152% since I recommended it in June 1997. Enjoy reading !!!!