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BIOLASE, Inc. Message Board

  • abter1 abter1 Jan 8, 2004 12:17 PM Flag

    Pre earnings runup

    IMHO there are three primary reasons the price has jumped up so much since December 19. First was institutional window dressing, trying to add a winner to their mutual fund EOY holdings list. The second was a spat of tax-related sales & purchases. Some folks wanted to cash in thier capital gains in '03, and start back in fresh in '04.

    The third reason is we are heading into the pre-earnings runup period for the anticipated February announcement. BLTI has a pretty compelling record of pre-earnings runup. Even more interesting, they have tendancy to post-earnings letdown. I think investors are starting to see this, and try to take advantage.
    Lets look at the facts by examining the 4 earnings announcements that occurred in 2003. I use as "earnings dates" the dates of their press conferences/earnings releases (not the SEC reporting dates). All prices are closing prices as reported by Yahoo.

    In all 4 pre-earnings periods in '03, BLTI had a strong and above normal price increase. First, I calculated the 5 day average price in the 16 to 20 trading days before the earnings release. Over the next 15 trading days (i.e., up to the closing price the night before earnings were released), the % increases for BLTI were: 22.9% (Oct 03), 35.2% (Jul 03) 28% (Apr 03) and 32.1% (Feb 03). Calculating the same % increase at the close the day of earnings doesn't change it much: 23.1%, 31.8%, 19.3% and 25.6% (all the results series I discuss are in the same Oct 03 to Feb 03 order).
    Over the entire wonderful period from Jan 1, 03 to yesterday, BLTI increased an amazing average of 7.5% every 3 weeks (15 trading days). While that is pretty incredible, it is considerably lower than the increase in the 15 trading days pre-earnings. In fact, if you bought at the average price during the 16-20 day preannouncement period, and sold the night before closing each time, you would have multiplied your original investment by 2.43 times. If you held the entire year, you would have multiplied it by 3.03 times. Hence the 60 pre-announcement trading days in the year (less than 1/4 of the trading days in the year) accounted for 80% of the years increase.
    Conclusion 1: there is a strong pre-earnings runup. You can juice these increases even more by looking at the lowest-to-highest prices over the 20 day period, but that is assuming someone can call the tops and bottoms...not very likely.
    So, what happens afterwards? A more mixed bag, but still fascinating.
    First, look at the "best to worst". From the peak day in the 15 trading days before earnings to the minimum price in the 15 days after, the price change for the same 4 earnings periods was: -21.4%, -29.7%, +2.2%, and -17.4%. Being a bit more reasonable, and looking at the drop from the earnings date close to the average price 16-20 trading days afterwards, you get -17.4%, -19.3%, +27.1%, +13.9%. Or for the average on trading days 11-15 days after earnings: -16.7%, -19.8%, +16.8%, +11.4%
    What to make out of all this?
    1) Abter1 has waay to much time on his hands
    2) BLTI is experiencing some "buy on rumor, sell on fact" syndrome. By "rumor" here I mean expectation...I don't believe there is much leaked info, just that we routinely expect wonderful quarterly results, and generally have gotten them last year. Then a more modest blow-off occurs.
    3) How to capitalize on this? Earnings are coming soon. They have released in mid-to-late February in both 2002 and 2003 (with guidance issued in Jan 2003). You could play this two ways. For the pre-announcement earnings phenomena: A) assume history will repeat itself, and buy (stock or options) soon, or B) assume Mr. Market has figured this out, and we are already seeing the pre-earnings runup, and sell. For the riskier post-announcement earnings observations: sell about earnings day, wait for a 10-20% drop, and buy back in.

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    • Why did you reply to your own post? Didn't you criticize me for that?

      Back to ignore. You mentioned me, and I responded. Lesson learned.

    • sphinx
      a little truth mixed with lots of negatively slanted opinion is the MO. Remember this is a pro you are dealing with. Just disengage.

    • You are correct sir!
      It is far better to have a small dilution in a much larger company with a higher share price.
      This whole discussion took place many months ago. I seem to remember that BLTI is in a "quiet period." and possibly cannot comment on how they may spend the money.
      Bottom line...We investors in BioLase Technologies have a comfort level with management. We have hard earned money on the line.
      Some non-investors and "bashers" claim they do not have a comfort level with the company. They do not have their hard earned money on the line.
      What they say has no merit. Their opinion really does not matter.
      This "disrupter" is "all hat and no cattle."
      As far as I'm concerned he should ESAD.

    • I think I once said that your opinions don't bother me, one way or the other, and you have a right to express them. But at such great, trivial length?? Good Godfrey and Daniel!

    • CSA, writes, "while indeed some dilution will occur, it is immaterial when held in the light of potential future earnings? Further that you believe managment is wise enough to leverage the cash raised to produce additional revenue and earnings beyond what they could have by simply standing pat? And that regardless of said dilution, the shares you own today will be worth more in the future than they would have as a result?"

      This could be the case. At this point it comes down to a matter of faith.

      Why does it make me a basher to ask management to explain how the above will occur before they sell 15% of the stockholders equity?

    • jmyoung, writes, "I'd rather have 84% of $40, than 100% of $19." True enough, but I'd rather have 100$ of $40 than 84% of $40.

      What is so wrong about asking management to explain why they need the money?

    • No doubt "Having $50 million in cash and no debt will sooth those fears." Is that worth 15% of your equity?

      If BLTI meets earnings estiamtes for 2004 they'll earn +$10M on top of the $+6M they earned in 2003.

      Wouldn't $10M in the bank AFTER a new production facility be just as soothing?

    • Sure spent a lot of time writing your "thoughts"....reading mine would have only taken a second or I did write info related to BLTI...I said it sucks.....dilution....back to .50 cents.....

    • The lemmings say they trust managment and they don't mind they are selling 15% of their equity. OK, Great for the lemmings.

      I think managment should have to explain why they need to sell 15% of shareholderfs equity, especially since their previous press releases indicate they don't need the money to continue growth.

      Why are the lemiings upset my this?

      Why are there no comments on the other 9 items in my post?

      "1. Biolase has had a great last couple of year and looks to have a few more. BLTI is the perfect small cap growth stock for a long-term investor to put in a drawer and ignore for a few years.

      2. The stock is very volatile and it is more profitable to trade it than my and hold it if you follow it closely. I have demonstrated that to be true earnings over $20/share trading the stock last year.

      3. As part of that trading, there were many times in the being of the year when the stock was short term over-valued when I shorted the stock. I don�t thing the stock is overvalued right now, but I did sell my last long position at $17.28 before Christmas. It appears I should have held on a couple of more weeks, but such is life.

      4. Management has gone an excellent job growing the company to make it the leader in the laser dentistry field.

      5. Management has done a TERRIBLE job dealing with Wall Street and potential investors. The coming up on 8 month offering, the accounting fiasco, the �E� addition and removal from the stock exchange symbol, the last two conference call, the presentation of the numbers in the third quarter press release to name just the biggest ones.

      6. It is a FACT that $3,445,000 in sales and $2,066,000 in profits have been transferred to 2003 from earlier years. The impact of this will screw up year over year evaluations for the next two years, unless management clearly states how pushing the earnings forward from 2000, 2001, 2002 and the first two quarters of 2003 effects the numbers.

      7. I think the stock offering is a TERRIBLE idea. It appears the company earned over $5M cash last year (the 4th quarter was most of that and is still unknown). This is more than enough to grow the dental business, which is in a very critical stage and support R & D. The talk of expanding the use of their patents to other uses is VERY premature IMHO and if pursued can only hurt earnings earn term and may kill the company long term.

      8. There is a substantial stock dilution coming. The following numbers are facts:
      Offering ���������...2.5M shares
      AMT registration������..0.3M shares
      Issued, but unrecognized options: ..1.1M shares (from the prospectus and the 3Q04
      Reserved, but not issued options: ..0.6M
      Fully diluted shares 3Q04:��.�.23.4M
      Dilution�.23.4/27.9 = 84%

      9. It is a fact the median TTM PE of the stock in 2004 was 63 and the average was 67. It is also a fact that the all time high closing PE was 99 on June 2nd of last year. The earnings push forward has skewed the number along with the end of the 4th quarter, but the current TTM PE without the accounting push forward is 88.

      10. I don�t think there is a vast conspiracy to either hold the stock down or push it up. I do believe for short periods of a day or two, the stock is moved artificially to pick up stop loss orders or move the price at the end of the day in an attempt to lure or shack out shareholders."

    • The only thoughts I have on that is if someone writes one or two standard messages that doesn't address anything inparticular about BLTI but explains clearly who this person is and how we know who he is and then post it once an hour or so. As for myself, when I see the title of the message with his initials, I have been passing it by without reading. Why get bored with nonsense is how I feel.

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