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This stock contains two attributes that are very hard to find together: High relative strength and low PEG ratio. I didn't buy an IBD today, but RS is probably near 90 after today's trading. The PEG is 0.50 at a price of $17 on consensus earnings estimates of 1.02 for FY98 (ending April). If anyone is a fan of the Motley Fool here is the relevant small cap growth stock selection criteria (with the target value in parenthesis): 1. Annualized Sales = $40.3 MM (< $200 MM) 2. Daily Dollar Volume = $280K (< $3 MM) 3. Share Price = $17 ($5 > $17 < $20) 4. Net Profit Margin = 7% (> 10%) 5. Relative Strength = 80+ (> 90) 6. Earnings Growth = 258% (> 25%) Sales Growth = 140% (> 25%) 7. Insider Holdings = 30% (> 15%) 8. Cash Flow = negative (positive) I would think we are close enough to #5 after today. #4 is light and #8 is the biggest weakness of this company. Personally, I feel that I can keep an eye on the cash flow problem. Its up to management to fix this. I think its a function of the huge growth this company is experiencing. The above earnings and sales growth are staggering, so is the earnings and sales growth called for by analysts. I await the March earnings release to see further evidence that management is up to the task of growing this company. Its not easy; I like the move of substituiting a bank line of credit for the factor relationship. The move overseas, buying the licensees out, is very high reward but very high risk. Small caps in general have been in a bear market. However, the contrarian in me says this might be good for long term buy and holders and short term momentum traders. Again, everything looks great; keep your eye on the cash flow and dilution, and lets hope management is up to the task of taking this company to fair value ($30+). | ||||||||||||||
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