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Palomar Medical Technologies Inc. Message Board

  • jesjoejes jesjoejes Apr 23, 2003 7:54 AM Flag

    I wish the posters that have no

    interest in the stock PMTI leave and find one that does. With all there wisdom and knowledge about stocks and Pmti they must certanly be billionares by now. May I suggest a conversation with Bill, Warren,Ted Turner,etc. They are in your league ,not us. Thanks anyway. Don't let the door hit you on your way out.

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    • Your wish is just that, a wish. I certainly will not ask for your permission to post here. If you can't stand other people's opinion you should not read public message boards in the first place. Many thanks for your understanding.

      although some individuals obviously don't like a discussion that focuses on real life results and hard numbers rather than hot air, I'll not let these guys dictate what I will do or not do.
      I'm sure you'll agree to the assumption that in the end what really counts are profits. Sales, or better increasing sales are perceived as a precursor of future profits. PMTI increases sales at a rapid pace right now and already they are profitable. BTW, profits on sales of around 7 million are quite some achievement IMO.
      So PS is the most unreliable indicator. Even PE is not very good at growth companies since it totally ignores growth at all and will value a 70+ years old car manufacturer (most of the time no growth at all) and a micro cap medical device company absolutely the same which of course is nonsense.
      In order to take into account the growth rate of a company it makes more sense to work with PEG figures. That's a PE devided by the growth rate. A broadly accpeted and rather conservative PEG is 1. Of course PEGs like any other specific value can only be a rule of thumb since a myriad of other factors play an important role for a company's future success (management, competition, intellectual property, economic environment, size of the targeted market (saturation), etc., you get the picture). In any case one should use FUTURE earnings and FUTURE growth rates since historic numbers are just that, history.
      At the end of the day it all boils down to making reasonable guesses as to how much the company will sell and as a result how much it will earn.
      So the first step is to assess future sales and make a gross margin guess, after that make an estimate how much the company will spend on selling, advertising, R&D, etc. and you'll end up with a net profit number.
      Past years can be helpful in assessing the seasonality of the business (unfortunately not in PMTI's case). New products that have been introduced in the meantime will play a role in coming quarters and comments made by management during a conference call can help making reasonable estimates regarding the cost structure. Nothing is certain but what you get as a result is MUCH BETTER than the hunch or gut feeling most others rely on.
      After every quarterly report and conference call you have to make adjustments to your estimates so that they always provide an up-to-date picture of what you already know and what your current best guess for the near future is.
      When you have made these estimates you can multiply next 4 quarters' earnings and estinated growth rate. The result is the price that is supported by a PEG of 1. On top of that you can add additional things like a "sexy story" bonus or a "bigshots names bonus" but that is unrelated to the intrinsic value of the company, the value the company generates on its own, on its own business and financial results.
      When ppl pay premiums for a sexy story for something else this is where "hype" comes in. You'll pay for something that is very volatile and can burst within a second. Just IMAGINE at some point PMTI would issue a PR in which they announce the agreement with G was terminated. I'M NOT SAYING THIS WILL HAPPEN, but it CAN happen. As an instant result the stock get trimmed back to its fundamental value. That's why I consider the "calculated fundamental value" or estimated fair value as a cushion.
      Right now PMTI's estimated growth rate and future earnings depending on what numbers you fill in support a share price of somewhere between $2.50 and 4.00. You may come up with higher prices but you'll have a hard time giving an explanation as to how you come up with either such high growth rates or earnings.