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Technology Stocks : Perot Systems (PER) -- Ignore unavailable to you. Want to Upgrade?

To: Mohan Marette who wrote (165)	2/4/1999 12:28:00 AM
From: Risky Business	Respond to of 542

OT Analyst Report on the IT firm to watch in 99' PE 21, Latest eps up 62% next quarter will be a triple digit increase. Currently this stock is being followed by only two analysts I expect this stock will be getting more coverage soon. Record Fourth Quarter -- Visibility, Outlook for 99 Excellent. Strong BUY Sapiens posted record fourth quarter results, surpassing our expectations on all fronts. Sales of $21.6 mil and earnings of 16¢ beat our $19.5 mil and 13¢ estimates decisively. The strong fourth quarter results not only evidence Sapiens' growing business momentum, but also provide an early glimpse at the company's growth potential as Sapiens leverages its "foot-in-the-door" strategy to win larger, more lucrative enterprise reengineering and outsourcing deals. We continue to believe the shares remain undervalued relative to the opportunity and reiterate our STRONG BUY.Quarterly Highlights Sapiens reported strong fourth quarter results, with sales of $21.6 million and earnings of $0.16 well ahead of our $19.5 million and $0.13 estimate. In particular, product revenues of $12.0 million were especially strong, blowing past our $9.7 million estimate as Sapiens continued to experience strong demand for its full enterprise development solutions. Sapiens order backlog was impressive both in terms of growth and composition, as only 10% of large orders received in the quarter were actually recognized, and an estimated 80% of new bookings were for non-Y2k solutions. By comparison, non-y2k solutions comprised 55% of total sales in fiscal 1998. We believe these figures warrant particular focus as they evidence not only Sapiens' formidable backlog and hence, fiscal 1999 visibility, but importantly, Sapiens' continued and growing success in exploiting non-Y2k business.Euro Continues to Provide Upside Despite Sapiens' record performance, the company did not recognize any Euro conversion related revenues in the fourth quarter. This includes the high-profile, multi-million dollar contract with Mutuelle Industrie du Petrole, the premier mutual healthcare insurer in the French oil and gas industry, announced in late November. We believe the demonstrated strength of Sapiens' non-Euro business, in conjunction with the expected fiscal 1999 ramp in Euro project revenues, will allow Sapiens to continue to outperform our current growth expectations.Balance Sheet Remains Strong Balance sheet performance remained solid, with DSOs dropping to 80, from 82 in the September quarter. Management has done an excellent job in managing this aspect of the business as DSOs have consistently trended down over the last four quarters from a March 1998 high of 120. Considering roughly 60% of sales come from European territories (where DSOs typically average well over 100-110 days) this is particularly noteworthy and in our opinion, a testament to the strength and prowess of the management team. Cash and equivalents increased roughly $3 million to $1.52 per share, while return on equity (ROE) reached record levels of 44%.Raising Numbers, Model Remains Conservative In light of the strong demand environment for Sapiens' solutions and the company's continued ability to execute on its "foot-in-the-door" strategy, we are raising our fiscal 1999 estimates roughly 5%. Our new sales forecast of $89 million contemplates roughly 25% year to year growth - conservative by our estimates considering Sapiens closed a record year with roughly 60% topline growth. Our net income estimate also rises about 5% to $13.4 million, reflecting our expectation of 47% year to year growth. This increase would have yielded earnings per share of roughly 60¢, an increase of roughly 4¢. However, given the recent strength in the stock price, roughly 2.2 million in additional share dilution was added to our model - the result of 1.2 million in outstanding preferred warrants and another 1 million in employee options. The subsequent increase in share count to 24.0 million from our original 23.4 million estimate mitigates any bottomline impact.Outlook for 1999 We believe Sapiens is ideally positioned for growth in calendar 1999 as the company leverages its extensive services infrastructure and growing reputation to deliver proven solutions to enterprise development customers. We believe our current estimates for fiscal 1999 of $89 million in sales and earnings of $0.56 are conservative, and reiterate our 6-month price target of $15. Moreover, we suspect the shares will likely experience strengthening momentum as more lucrative, high-profile deals are announced over the coming months. We reiterate our Strong BUY. Sapiens is a leading provider of enterprise Rapid Application Development (RAD) solutions, several subsets of which are tailored for specific business issues like Year 2000 remediation, the Euro monetary conversion, and E-Commerce. We believe Sapiens is differentiated in the market because customers can use their tools to both remediate antiquated code and over the longer term, reengineer their mission-critical business applications