3SOF

hi,
thanks ,
i have never had any luck holding through earnngs . may steal myself for this one though.
max

Minor Axiom I
Always play for meaningful stakes.

Quote from: David Randolph on May 08, 2007, 05:41:03 PM
The problem has always been profitability. As we've seen previously on this thread, the company went through an intense cost cutting effort, and Q4 2006 was the most profitable ever, with net income of $577,000 and EPS of $0.07. And a continuation of this is our hope for Q1, not so much revenue growth (due to seasonality), but another profitable quarter. As I said yesterday, just a $0.10 EPS number for the quarter and probably CIMT will almost instantly trade at $8, and it would still be cheap at those levels (the speed of this stock doesn't allow you to take profits and jump back in if the news is positive - you would have to pay a much higher price due to a huge gap up at the open). But if we get just $0.05 it isn't a case to panic either, I'll keep holding CIMT if that happens.

I do not see how you can justify $0.10 for Q1 EPS when Q4 EPS was only $0.07 and you know that Q1 revenue will be less than Q4.  The cost-cutting has already taken place and the new product (Cimatron8) was not released until late in the quarter.  I think I will have to sell before earnings if CIMT stays above $4.00, knowing that Q1 EPS will be in the 4-6 cent range.

For an EPS of 0.10, CIMT will need a net income of $783,500 (based on 7,835,000 shares).  That would require approximately a revenue of 6,300,000. 

        Rev ($,000s)     Income ($,000s)
Q406    6,028               557
Q306    5,014               (403)
Q206    5,044                 18
Q106    5,374                220
Q405    5,425               514
Q305    4,896               (562)
Q205    5,033               (1,293)
Q105    5,572                (981)
Q404    6,403               (249)

Quote from: buddjas1 on May 08, 2007, 08:26:20 PM

Quote from: David Randolph on May 08, 2007, 05:41:03 PM
The problem has always been profitability. As we've seen previously on this thread, the company went through an intense cost cutting effort, and Q4 2006 was the most profitable ever, with net income of $577,000 and EPS of $0.07. And a continuation of this is our hope for Q1, not so much revenue growth (due to seasonality), but another profitable quarter. As I said yesterday, just a $0.10 EPS number for the quarter and probably CIMT will almost instantly trade at $8, and it would still be cheap at those levels (the speed of this stock doesn't allow you to take profits and jump back in if the news is positive - you would have to pay a much higher price due to a huge gap up at the open). But if we get just $0.05 it isn't a case to panic either, I'll keep holding CIMT if that happens.

I do not see how you can justify $0.10 for Q1 EPS when Q4 EPS was only $0.07 and you know that Q1 revenue will be less than Q4.  The cost-cutting has already taken place and the new product (Cimatron8) was not released until late in the quarter.  I think I will have to sell before earnings if CIMT stays above $4.00, knowing that Q1 EPS will be in the 4-6 cent range.

For an EPS of 0.10, CIMT will need a net income of $783,500 (based on 7,835,000 shares).  That would require approximately a revenue of 6,300,000. 

        Rev ($,000s)     Income ($,000s)
Q406    6,028               557
Q306    5,014               (403)
Q206    5,044                 18
Q106    5,374                220
Q405    5,425               514
Q305    4,896               (562)
Q205    5,033               (1,293)
Q105    5,572                (981)
Q404    6,403               (249)

I understand your concerns about holding thru earnings, but I believe this time is very different since if you follow the timeline of press releases the company issued starting in 2005 and leading up to the most recent one, you can clearly see the improving pattern.  For starters, the company completed the reorganization in Q4 of 2005 resulting in a loss of .22 per share.  Begining in 2006, the company began moving on the fast track to profitablity.  The company was profitable in each quarter of 2006 except for Q3 since they acquired the remaining 70% of the Korean distributor in which they previously owned 30% of.  Now that they own 100% of this large Korean distributor as well as expanded their Asian market salesforce, they remained on track to achieving future profits which they showed on Q4 of 2006.   If they had not acquired the 70% interest, they would have turned a profit resulting in 4 consective profitable quarters in a row.   The only added expense I see happening in Q1 of 2007, are the costs of opening the two new offices in China, but I'm sure the previous expansion efforts elsewhere probably offset this cost thus maybe allowing a surprise Q1 2007 results.  Here's a link to the company's website, check it out and read the press releases.

http://www.cimatron.com/pressreleases.aspx?FolderID=68&lang=en
Good Luck
Mbaugh

Quote from: mbaugh on May 08, 2007, 10:54:02 PM
I understand your concerns about holding thru earnings, but I believe this time is very different since if you follow the timeline of press releases the company issued starting in 2005 and leading up to the most recent one, you can clearly see the improving pattern.  For starters, the company completed the reorganization in Q4 of 2005 resulting in a loss of .22 per share.  Begining in 2006, the company began moving on the fast track to profitablity.  The company was profitable in each quarter of 2006 except for Q3 since they acquired the remaining 70% of the Korean distributor in which they previously owned 30% of.  Now that they own 100% of this large Korean distributor as well as expanded their Asian market salesforce, they remained on track to achieving future profits which they showed on Q4 of 2006.   If they had not acquired the 70% interest, they would have turned a profit resulting in 4 consective profitable quarters in a row.   The only added expense I see happening in Q1 of 2007, are the costs of opening the two new offices in China, but I'm sure the previous expansion efforts elsewhere probably offset this cost thus maybe allowing a surprise Q1 2007 results. 

I am not sure I understand your point.  Do you believe that CIMT will post $.10 for the quarter?  If so, why?  Is that what you mean by "surprise Q1 2007 results."  Or, do you simply believe that CIMT will be profitable?  If so, will a small profit be enough to support the price of the stock. 

Maybe not .10, but I believe they will post a profit and it will surpass that of Q12006 profit and yes I believe this will make the stock move higher.  The fact that they are improving their margins could reveal a surprise quarter. 

i don't know about u guys...but b/c of CIMT...i'm now able to stomach +/- 8% per minute in any given stock....

Thanks for the stimulating debate on CIMT, buddjas1 and mbaugh (applaud).

It's very hard to know who's right for Q1 2007. I would say an EPS below $0.05 will be interpreted as negative by the market, and above $0.05 as positive. On the extremes, a negative EPS number will probably take the stock immediately down 20%-40%. And an EPS of $0.1 or more will probably make it move 100% or more to the upside. So everyone place your bets and roll the dice, right?

Not so fast. Due to the unpredictability of one single quarter, I think we should use trends to make decisions about long term investments, not just one or two data inputs. CIMT may very well have $0 EPS in Q1 2007, $0.10 in Q2, $0.15 in Q3 and $0.20 in Q4. This data series would mean a full year 2007 EPS of $0.45, which multiplied by the 34.38 average earnings multiple of the technical software industry gives me a price per share of $15.47. So I urge you to think twice about selling, even if Q1 is weaker than expected.

QuoteI do not see how you can justify $0.10 for Q1 EPS when Q4 EPS was only $0.07 and you know that Q1 revenue will be less than Q4.  The cost-cutting has already taken place and the new product (Cimatron8) was not released until late in the quarter.  I think I will have to sell before earnings if CIMT stays above $4.00, knowing that Q1 EPS will be in the 4-6 cent range.

For an EPS of 0.10, CIMT will need a net income of $783,500 (based on 7,835,000 shares).  That would require approximately a revenue of 6,300,000.

Good points buddjas1. But I don't think CIMT needs revenue of $6.3 M to achieve $783,500 in net income, net profit margin can expand. Both SG&A costs and R&D costs have been trending down as a percentage of sales. But since Cimatron8 was concluded just in March or there about, probably it is wrong to expect a big drop in R&D, or a big surge in sales in Q1. But what about Q2 2007? That will probably be very strong.

My valuation model applied to CIMT is conservative in my view. No dilution expected, because there wasn't any for the past 10 years. Just 20% average annual revenue growth. An expansion of net profit margin from 9.24% in Q4 2006 to 15% in 2009. And an earnings multiple similar to the industry average. If these reasonable long term expectations are achieved, the stock will close 2009 at $24.45, which means a share price compound annual growth rate of 87%.

I'll keep focusing on the longer term trends and will ignore a possible weak Q1 because of seasonal factors. I'll continue holding CIMT for the long term.

Quote from: David Randolph on May 09, 2007, 05:02:28 PM
Good points buddjas1. But I don't think CIMT needs revenue of $6.3 M to achieve $783,500 in net income, net profit margin can expand. Both SG&A costs and R&D costs have been trending down as a percentage of sales. But since Cimatron8 was concluded just in March or there about, probably it is wrong to expect a big drop in R&D, or a big surge in sales in Q1. But what about Q2 2007? That will probably be very strong.

I totally agree.  Then why not sell before the 10Q and buy after?  I feel that you are "long-term" holding stocks like CIMT just to prove a point and not because it is a good idea.  Sometimes you say that you do not buy stocks based on "future events," but that is exactly what you are doing here.  You are hoping for a good quarter not predicting a good Q1 based on the available data.  Don't let this "long term" holding idea ruin your edge.  (Don't forget what got you here.)

QuoteThen why not sell before the 10Q and buy after?

Because the benefit of having a positive quarter compensates the risk of having a bad one. Moreover I'm not in the quarter by quarter prediction game, I think that is a loser's game, similar to trying to predict if a stock will be up or down tomorrow. I analyze trends, not individual data points.

QuoteI feel that you are "long-term" holding stocks like CIMT just to prove a point and not because it is a good idea.

I think I've been flexible enough for everybody to see that I don't care about proving points, my objective is achieving the highest return with the lowest risk. I change my mind when I have to, since my ego was lost long ago, fortunately.

QuoteSometimes you say that you do not buy stocks based on "future events," but that is exactly what you are doing here.

I bought the stock two months ago at $2.9, so I'm not buying it today, just holding for the long term due to the expectation of the continuation of a fundamental improvement that started with Q4 2006. If I wait for the fundamental improvement to be all over the news I'll have to buy the stock 200% or more higher.

QuoteYou are hoping  for a good quarter not predicting  a good Q1 based on the available data.

I don't care about the quarter, just about what the future holds two or three years from now.

QuoteDon't let this "long term" holding idea ruin your edge.  (Don't forget what got you here.)

I feel I'm much better now than in the past and that the current strategy can be used for decades to come. I couldn't say the same before.

CIMT is a $30 M market cap global software company that never diluted shareholder's value. Too much of an attractive opportunity to worry about one quarter of data in my view.

But thanks for sharing your thoughts, they're very interesting

applaud David. I like the strategy you decided to follow and that you defend so eagerly much more than the daytrading... I feel much better when I do not have to follow every tick and every press release because I invest in fundamentaly sound companies.
I have only been trading for 1 year but even after such a short experience I feel that short term trading is less efficient that long term investments...

Quote from: raspi on May 10, 2007, 10:38:09 AM
applaud David. I like the strategy you decided to follow and that you defend so eagerly much more than the daytrading... I feel much better when I do not have to follow every tick and every press release because I invest in fundamentaly sound companies.
I have only been trading for 1 year but even after such a short experience I feel that short term trading is less efficient that long term investments...

I am not advocating day trading.  Rather, I advocate using the data available and making a smart decision.  CIMT at $4 is not the same stock it was at $2.60. 

well, bounce or break time for CIMT.

I would say that CIMT is not immune to the overall market drop today, I dont expect it to bounce today any more than I do any of the other stocks I have that are down a lot today.  Still holding patiently for the pot of gold at the end of the rainbow 

Quote from: tokyopua on May 10, 2007, 03:51:11 PM
Still holding patiently for the pot of gold at the end of the rainbow 

What's your analysis?  Why are you optimistic?

Quote from: raspi on May 10, 2007, 10:38:09 AM
applaud David. I like the strategy you decided to follow and that you defend so eagerly much more than the daytrading... I feel much better when I do not have to follow every tick and every press release because I invest in fundamentaly sound companies.
I have only been trading for 1 year but even after such a short experience I feel that short term trading is less efficient that long term investments...

I agree raspi, there's no economic basis to sustain short term trading as a viable business or way to grow one's wealth (except for the brokers, they love it). I'm not saying one can't win a lot on a winning streak, but a losing streak will inevitably follow and years go by and after 20 years the short term trader looks back and sees he made a lot less money that what he ought to (if he lasts that long, which is rare).

QuoteI am not advocating day trading.  Rather, I advocate using the data available and making a smart decision.  CIMT at $4 is not the same stock it was at $2.60.

I agree, buddjas1 is no day trader. He knows fundamental analysis and reacts accordingly.

But as I look to stocks that made huge bull runs (those that rise several bags), they always had weak periods in between and "weak" quarters. It is impossible to sustain many bags of profits (a bag means a 100% gain from the original entry point) without such periods and fundamental "misses". So, if like buddjas1, you're decided to take profits every time you see a quarter below expectations or a technical breakdown, you're also deciding to give up on holding stocks that rise several bags over the years. You're thinking you can achieve a 30% consistent long term average annual return with that course of action. My take is you won't be able to do that, because you're not basing your investment decisions in sound economic principles. If you had a business, would you sell it because one quarter wasn't perfect?

This is an open and interesting debate and buddjas1 has been one of the best arguing for his case, so let me applaud him again.

Quote from: buddjas1 on May 10, 2007, 03:44:03 PM
well, bounce or break time for CIMT.

CIMT can break or bounce all it wants, it doesn't matter anything for the outcome of this investment. Please check that ANGN chart again, back on this thread.

Quote from: tokyopua on May 10, 2007, 03:51:11 PM
I would say that CIMT is not immune to the overall market drop today, I dont expect it to bounce today any more than I do any of the other stocks I have that are down a lot today.  Still holding patiently for the pot of gold at the end of the rainbow 

Yes, CIMT's short term moves mean nothing for what the future holds, and I'm not talking this or next quarter, but 2 or 3 years from now. This company is ready to reward patient investors with a 92% average annual return. If you (not you Tokyo, talking in general) think you can beat that with other stocks, go ahead and sell. If you consider no man, alive or dead, has ever achieved a 92% average annual return consistently then you better just keep on holding CIMT. That's what I'll do.