From: owner-canslim-digest@lists.xmission.com (canslim-digest) To: canslim-digest@lists.xmission.com Subject: canslim-digest V2 #2063 Reply-To: canslim Sender: owner-canslim-digest@lists.xmission.com Errors-To: owner-canslim-digest@lists.xmission.com Precedence: bulk Content-Transfer-Encoding: quoted-printable X-No-Archive: yes canslim-digest Saturday, January 19 2002 Volume 02 : Number 2063 In this issue: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] ---------------------------------------------------------------------- Date: Sat, 19 Jan 2002 21:16:34 -0800 From: Ian Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] This is a multi-part message in MIME format. - --Boundary_(ID_iWQ88cLDsBh8vzKAt327kg) Content-type: text/plain; charset=iso-8859-1 Content-transfer-encoding: 7BIT Katherine: I have listened to the last 2 conference calls, and management paints a very different picture. The acquisition from last year has been negligible to overall revenues, and has not contributed to earnings yet. Rather, the fact that they are in a new product cycle, expanding internationally, and are moving into new verticals, has been given as their reason for the recent growth. Moreover, they claimed last Q that existing backlog should make Q4 2001 and Q1 2002 comparable with the last 2 quarters. They also seemed confident that their customer base and recurring revenue stream had finally reached a "critical mass" that would ensure continuing growth. They weren't sure what exact growth rate they would have, but they were confident growth would continue. Finally, they were confident that the Law Manager acquisition from last year was finally about to contribute meaningfully to earnings. In the face of this, it strikes me as odd that there would still be an active covering analyst with such low estimates. Maybe that means that the next earnings report (rumored to be on Feb. 11) will be the one that either breaks them, or sends them to a new level as they finally have a share price over $10 and a market cap over $100,000,000. We'll see. Ian ----- Original Message ----- From: Katherine Malm To: canslim@lists.xmission.com Sent: Saturday, January 19, 2002 6:48 AM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Hi Tom This is what I don't get, and I'm not trying to be objectionable, just trying to find out how you'd get $.16/quarter given the company's history. When I look at this, I see OK growth in revenues, but the company continuously has good and bad quarters. I noticed in the 10Q that they capitalize software development and then write it off in chunks every so often (not uncommon) and it's possible that these negative quarters every so often are related to that. I'm guessing if I were to dig further into the financials I would get to know them better. I know that they did an acquisition in 2000, and I'd assume that the growth in EPS would be related. I look at Sept/Oct 99 and see really nice quarters just like the last two we've seen recently, but they are then followed by negative or so-so quarters. That raises red flags and would lead me to question whether the growth pattern shown recently can be projected into the future. Katherine GROWTH RATES 1 Year 3 Years 5 Years Sales % -11.70 15.54 -14.53 EPS % NM NM NM Dividend % NM NM NM REVENUE Quarters 1998 1999 2000 2001 MAR 8,343 12,988 13,334 14,295 JUN 10,850 15,401 13,741 17,392 SEP 12,385 15,381 12,858 18,516 DEC 13,484 15,496 12,399 Totals 45,062 59,266 52,332 50,203 Note: Units in Thousands of U.S. Dollars EARNINGS PER SHARE Quarters 1998 1999 2000 2001 MAR -0.070 0.010 0.050 -0.040 JUN -0.060 0.080 0.010 0.160 SEP 0.020 0.140 -0.020 0.230 DEC -0.030 0.210 -0.060 Totals -0.140 0.440 -0.020 0.350 Note: Units in U.S. Dollars ----- Original Message ----- From: Tom Worley To: canslim@lists.xmission.com Sent: Saturday, January 19, 2002 8:27 AM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Hi Katherine, I see 16 cents as easy based on the last 4 sequential quarters (last two were 16 and 23 cents). Sales appear to be accelerating thru Q3, so even a moderate slowdown in acceleration should still leave them well over 16 cents/qtr. Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message ----- From: Katherine Malm To: canslim@lists.xmission.com Sent: Saturday, January 19, 2002 9:09 AM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Tom, Ian Just curious...where do you get $.16/Q EPS estimates? I took a *very* quick glance at the last 10Q, are you basing this on the acquisition in 2000? Katherine ----- Original Message ----- From: Tom Worley To: canslim@lists.xmission.com Sent: Saturday, January 19, 2002 12:25 AM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] I agree, Ian. My second trip on this stock has nearly made up the loss from the first voyage. Looks more promising now than the first time I tried it. Sequential growth particularly impressive. Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message ----- From: Ian To: canslim@lists.xmission.com Sent: Friday, January 18, 2002 8:01 PM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Thanks a lot for the chart analysis. The low volume during the new high to $13.50, and the high volume/no progress days on 1/10, 1/11, and 1/15 were the things that concerned me. I convinced myself that the low-volume high was just a case of 'too much, too fast' off the $5 October low. The recent high volume/no movement days are what concern me. There shouldn't be much concern with P/E. The company claimed that Q4 2001, and Q1 2002 were already filled with existing backlog, and I figure that a minimum of $0.16 per Q is easy - so 4 months from now, the ttm EPS will be at least $0.70 if not more, and the P/E at current levels would be under 20. Given their industry group and recent growth rate, a much higher price could easily be supported. But I would like to see more signs of volume accumulation here. After the next earnings report the IBD EPS ranking should go over 85, and the RS is over 90 already, so it should start appearing on IBD radar screens for the first time - including the weekend review. Perhaps it will be a month or so before the next clear direction becomes visible. Thanks again, Ian ----- Original Message ----- From: Katherine Malm To: canslim@lists.xmission.com Sent: Friday, January 18, 2002 3:36 PM Subject: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Hi Ian, Your question has me wondering whether the sell rules that I follow translate perfectly to thinly traded stocks. But I'll tell you what I see and the way I would read it if I were to own it: -After the B/O at 7.13, stock moves up and consolidates for about 5 weeks. This is a "valid" consolidation so that makes the previous base low 8.01 which was printed on 11/23/01. -Just as a quick check for "overextension" that means that the stock is 70% above the 200dMA (7.02), 15% above the 50dMA (10.43) and 49.6% above the base low (8.01). It gets a yellow flag for being 70% above the 200dMA according to WON's sell rule #34, but does not get a red flag for the Rubberband Sell Rule. -After the consolidation and breakout 12/18 the stock has started to show signs of stress. This could easily be market related, but no way to tell. -1/2/02: New high on low volume. Red flag. -1/10/02 & 1/11/02- two days with little or no price progress on high volume. Red flag. -With 1 yellow and 2 red flags I thought it worth doing a PE Extension check. I've reconstructed the PE at the time of the B/O in October using trailing EPS numbers for the prior quarters. That puts it at $7.13/$.29 = 24.59. The extension warning would then be a forward PE of 24.59*2.21= 54.3. Let's see. DGO doesn't have any estimates, which means it isn't followed by enough analysts. I checked the internet to see if I could find anything and ran across this EPS/Rev snapshot: http://yahoo.marketguide.com/MGI/mg.asp?target=/stocks/companyinformation/highlights&Ticker=ELTE I am alarmed by the essentially flat revenues over the last 4 years, so I am going to go with the EPS estimates in my VectorVest software which reads a measly $.02. That puts the current forward looking PE at $11.98/$0.02 = 599! I'll have to mark that Red Flag. One note is that its industry is fairly healthy, consolidating after rising, not overly extended and currently ranked in the 2nd quartile. I'll let you take it from there! Katherine ----- Original Message ----- From: Ian To: canslim@lists.xmission.com Sent: Friday, January 18, 2002 4:40 PM Subject: [CANSLIM] Katherine - Opinion please? Would tuesdays distribution day for ELTE make you exit the stock at this point? Do you have any other insights into the chart? I would appreciate your analysis - it is the one big recent winner I am wondering what to do with. Based on all of my past experiences, and knowing the companies outlook, my gut tells me that it needs to consolidate here, but will run into the $20's by mid-year. But I'd rather listen to the chart. I fear I've held it long enough that I may be complacent. Thank you. Ian - --Boundary_(ID_iWQ88cLDsBh8vzKAt327kg) Content-type: text/html; charset=iso-8859-1 Content-transfer-encoding: 7BIT
Katherine:
 
I have listened to the last 2 conference calls, and management paints a very different picture. The acquisition from last year has been negligible to overall revenues, and has not contributed to earnings yet. Rather, the fact that they are in a new product cycle, expanding internationally, and are moving into new verticals, has been given as their reason for the recent growth. Moreover, they claimed last Q that existing backlog should make Q4 2001 and Q1 2002 comparable with the last 2 quarters. They also seemed confident that their customer base and recurring revenue stream had finally reached a "critical mass" that would ensure continuing growth. They weren't sure what exact growth rate they would have, but they were confident growth would continue.
 
Finally, they were confident that the Law Manager acquisition from last year was finally about to contribute meaningfully to earnings.
 
In the face of this, it strikes me as odd that there would still be an active covering analyst with such low estimates. Maybe that means that the next earnings report (rumored to be on Feb. 11) will be the one that either breaks them, or sends them to a new level as they finally have a share price over $10 and a market cap over $100,000,000. We'll see.
 
Ian
 
 
----- Original Message -----
From: Katherine Malm
To: canslim@lists.xmission.com
Sent: Saturday, January 19, 2002 6:48 AM
Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?]

Hi Tom
 
This is what I don't get, and I'm not trying to be objectionable, just trying to find out how you'd get $.16/quarter given the company's history. When I look at this, I see OK growth in revenues, but the company continuously has good and bad quarters. I noticed in the 10Q that they capitalize software development and then write it off in chunks every so often (not uncommon) and it's possible that these negative quarters every so often are related to that. I'm guessing if I were to dig further into the financials I would get to know them better. I know that they did an acquisition in 2000, and I'd assume that the growth in EPS would be related. I look at Sept/Oct 99 and see really nice quarters just like the last two we've seen recently, but they are then followed by negative or so-so quarters. That raises red flags and would lead me to question whether the growth pattern shown recently can be projected into the future.
 
Katherine
 
GROWTH RATES
1 Year 3 Years 5 Years
Sales % -11.70 15.54 -14.53
EPS % NM NM NM
Dividend % NM NM NM

REVENUE
Quarters 1998 1999 2000 2001
MAR 8,343 12,988 13,334 14,295
JUN 10,850 15,401 13,741 17,392
SEP 12,385 15,381 12,858 18,516
DEC 13,484 15,496 12,399
Totals 45,062 59,266 52,332 50,203
Note:  Units in Thousands of U.S. Dollars
 
EARNINGS PER SHARE
Quarters 1998 1999 2000 2001
MAR -0.070 0.010 0.050 -0.040
JUN -0.060 0.080 0.010 0.160
SEP 0.020 0.140 -0.020 0.230
DEC -0.030 0.210 -0.060
Totals -0.140 0.440 -0.020 0.350
Note:  Units in U.S. Dollars
----- Original Message -----
From: Tom Worley
To: canslim@lists.xmission.com
Sent: Saturday, January 19, 2002 8:27 AM
Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?]

Hi Katherine,
 
I see 16 cents as easy based on the last 4 sequential quarters (last two were 16 and 23 cents). Sales appear to be accelerating thru Q3, so even a moderate slowdown in acceleration should still leave them well over 16 cents/qtr.
 
 
Tom Worley
stkguru@netside.net
AIM: TexWorley
----- Original Message -----
From: Katherine Malm
To: canslim@lists.xmission.com
Sent: Saturday, January 19, 2002 9:09 AM
Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?]

Tom, Ian
 
Just curious...where do you get $.16/Q EPS estimates? I took a *very* quick glance at the last 10Q, are you basing this on the acquisition in 2000?
 
Katherine
----- Original Message -----
From: Tom Worley
Sent: Saturday, January 19, 2002 12:25 AM
Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?]

I agree, Ian. My second trip on this stock has nearly made up the loss from the first voyage. Looks more promising now than the first time I tried it. Sequential growth particularly impressive.
 
Tom Worley
stkguru@netside.net
AIM: TexWorley
----- Original Message -----
From: Ian
Sent: Friday, January 18, 2002 8:01 PM
Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?]

Thanks a lot for the chart analysis. The low volume during the new high to $13.50, and the high volume/no progress days on 1/10, 1/11, and 1/15 were the things that concerned me. I convinced myself that the low-volume high was just a case of 'too much, too fast' off the $5 October low. The recent high volume/no movement days are what concern me.
 
There shouldn't be much concern with P/E. The company claimed that Q4 2001, and Q1 2002 were already filled with existing backlog, and I figure that a minimum of $0.16 per Q is easy - so 4 months from now, the ttm EPS will be at least $0.70 if not more, and the P/E at current levels would be under 20. Given their industry group and recent growth rate, a much higher price could easily be supported. But I would like to see more signs of volume accumulation here.
 
After the next earnings report the IBD EPS ranking should go over 85, and the RS is over 90 already, so it should start appearing on IBD radar screens for the first time - including the weekend review. Perhaps it will be a month or so before the next clear direction becomes visible.
 
Thanks again,
 
Ian
 
 
 
----- Original Message -----
Sent: Friday, January 18, 2002 3:36 PM
Subject: Re:ELTE (was [CANSLIM] Katherine-Opinion please?]

Hi Ian,
 
Your question has me wondering whether the sell rules that I follow translate perfectly to thinly traded stocks. But I'll tell you what I see and the way I would read it if I were to own it:
 
-After the B/O at 7.13, stock moves up and consolidates for about 5 weeks. This is a "valid" consolidation so that makes the previous base low 8.01 which was printed on 11/23/01.
-Just as a quick check for "overextension" that means that the stock is 70% above the 200dMA (7.02), 15% above the 50dMA (10.43) and 49.6% above the base low (8.01). It gets a yellow flag for being 70% above the 200dMA according to WON's sell rule #34, but does not get a red flag for the Rubberband Sell Rule.
-After the consolidation and breakout 12/18 the stock has started to show signs of stress. This could easily be market related, but no way to tell.
-1/2/02: New high on low volume. Red flag.
-1/10/02 & 1/11/02- two days with little or no price progress on high volume. Red flag.
-With 1 yellow and 2 red flags I thought it worth doing a PE Extension check. I've reconstructed the PE at the time of the B/O in October using trailing EPS numbers for the prior quarters. That puts it at $7.13/$.29 = 24.59. The extension warning would then be a forward PE of 24.59*2.21= 54.3. Let's see. DGO doesn't have any estimates, which means it isn't followed by enough analysts. I checked the internet to see if I could find anything and ran across this EPS/Rev snapshot:
 
 
I am alarmed by the essentially flat revenues over the last 4 years, so I am going to go with the EPS estimates in my VectorVest software which reads a measly $.02. That puts the current forward looking PE at $11.98/$0.02 = 599! I'll have to mark that Red Flag.
 
One note is that its industry is fairly healthy, consolidating after rising, not overly extended and currently ranked in the 2nd quartile.
 
I'll let you take it from there!
 
Katherine
----- Original Message -----
From: Ian
Sent: Friday, January 18, 2002 4:40 PM
Subject: [CANSLIM] Katherine - Opinion please?

Would tuesdays distribution day for ELTE make you exit the stock at this point? Do you have any other insights into the chart?
 
I would appreciate your analysis - it is the one big recent winner I am wondering what to do with. Based on all of my past experiences, and knowing the companies outlook, my gut tells me that it needs to consolidate here, but will run into the $20's by mid-year. But I'd rather listen to the chart. I fear I've held it long enough that I may be complacent.
 
Thank you.
 
Ian
- --Boundary_(ID_iWQ88cLDsBh8vzKAt327kg)-- - - - -To subscribe/unsubscribe, email "majordomo@xmission.com" - -In the email body, write "subscribe canslim" or - -"unsubscribe canslim". Do not use quotes in your email. ------------------------------ Date: Sat, 19 Jan 2002 23:23:01 -0600 From: "Katherine Malm" Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] This is a multi-part message in MIME format. - ------=_NextPart_000_006E_01C1A140.3CE983C0 Content-Type: text/plain; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable Thanks for clearing this up Ian. Things like this can't be "seen" in the = records available online. Just goes to show that with a microcap such as = this, due diligence needs to be deep enough to uncover these clues. (And = conversely, the same would hold for uncovering rats in the attic for = other microcaps!) Have you made a decision as to whether to "sell on the technicals" or = will you wait for the next earnings announcement and conference call? The estimates I am using are from my VectorVest software. If there are = no analysts covering, they use past EPS and "significant developments" = to make a forward estimate. As I don't generally follow microcaps, I'm = not sure how reliable these numbers are. When I wrote my note yesterday, = that's why I looked at the historical Rev/EPS numbers myself before = taking their low forward EPS number at face value. One thing I did note in the financials from last quarter is that they = have not been writing off some of their software development costs this = year. From the 10Q 11/14/01: Research and development expenses for this year's third quarter of $1.7 = million (or 9.4% of revenue) increased slightly from $1.6 million (or = 12.5% of revenue) in 2000. Such expenses for the first nine months of = 2001 totaled $5.0 million (or 10.0% of revenue) compared to $4.4 million = (or 11.0% of revenue) for the first nine months of the prior year. = Research and development expenses consist primarily of salaries and = expenses of the Company's research and development personnel and outside = consultants. The higher expenses in 2001 over the same period last year = reflect costs for work to design and develop certain products to support = the Company's expansion into new Professional Services Automation = markets, partially offset by reduced expenses for Elite.com. Research = and development expenses exclude internally developed software costs = that were capitalized totaling approximately $320,000 for the third = quarter and approximately $900,000 for the first nine months of 2001. No = software development costs were capitalized in 2000.=20 The increased R&D effort for EIS is expected to continue through 2001 as = the Company completes development of its new product lines. The Company = is committed to maintaining strong research and development efforts so = it can continue to provide innovative software solutions as the needs of = its customer base and target markets change.=20 Something like this would certainly make 2001 EPS numbers "look" better = when comparing QoQ or YoY. Katherine ----- Original Message -----=20 From: Ian=20 To: canslim@lists.xmission.com=20 Sent: Saturday, January 19, 2002 11:16 PM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Katherine: I have listened to the last 2 conference calls, and management paints = a very different picture. The acquisition from last year has been = negligible to overall revenues, and has not contributed to earnings yet. = Rather, the fact that they are in a new product cycle, expanding = internationally, and are moving into new verticals, has been given as = their reason for the recent growth. Moreover, they claimed last Q that = existing backlog should make Q4 2001 and Q1 2002 comparable with the = last 2 quarters. They also seemed confident that their customer base and = recurring revenue stream had finally reached a "critical mass" that = would ensure continuing growth. They weren't sure what exact growth rate = they would have, but they were confident growth would continue. Finally, they were confident that the Law Manager acquisition from = last year was finally about to contribute meaningfully to earnings. In the face of this, it strikes me as odd that there would still be an = active covering analyst with such low estimates. Maybe that means that = the next earnings report (rumored to be on Feb. 11) will be the one that = either breaks them, or sends them to a new level as they finally have a = share price over $10 and a market cap over $100,000,000. We'll see. Ian ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Saturday, January 19, 2002 6:48 AM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Hi Tom This is what I don't get, and I'm not trying to be = objectionable, just trying to find out how you'd get $.16/quarter given = the company's history. When I look at this, I see OK growth in revenues, = but the company continuously has good and bad quarters. I noticed in the = 10Q that they capitalize software development and then write it off in = chunks every so often (not uncommon) and it's possible that these = negative quarters every so often are related to that. I'm guessing if I = were to dig further into the financials I would get to know them better. = I know that they did an acquisition in 2000, and I'd assume that the = growth in EPS would be related. I look at Sept/Oct 99 and see really = nice quarters just like the last two we've seen recently, but they are = then followed by negative or so-so quarters. That raises red flags and = would lead me to question whether the growth pattern shown recently can = be projected into the future. Katherine GROWTH RATES=20 1 Year 3 Years 5 Years=20 Sales % -11.70 15.54 -14.53=20 EPS % NM NM NM=20 Dividend % NM NM NM=20 REVENUE=20 Quarters 1998 1999 2000 2001=20 MAR 8,343 12,988 13,334 14,295=20 JUN 10,850 15,401 13,741 17,392=20 SEP 12,385 15,381 12,858 18,516=20 DEC 13,484 15,496 12,399 =20 =20 Totals 45,062 59,266 52,332 50,203=20 Note: Units in Thousands of U.S. Dollars=20 =20 =20 EARNINGS PER SHARE=20 Quarters 1998 1999 2000 2001=20 MAR -0.070 0.010 0.050 -0.040=20 JUN -0.060 0.080 0.010 0.160=20 SEP 0.020 0.140 -0.020 0.230=20 DEC -0.030 0.210 -0.060 =20 =20 Totals -0.140 0.440 -0.020 0.350=20 Note: Units in U.S. Dollars=20 =20 ----- Original Message -----=20 From: Tom Worley=20 To: canslim@lists.xmission.com=20 Sent: Saturday, January 19, 2002 8:27 AM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Hi Katherine, I see 16 cents as easy based on the last 4 sequential quarters = (last two were 16 and 23 cents). Sales appear to be accelerating thru = Q3, so even a moderate slowdown in acceleration should still leave them = well over 16 cents/qtr. Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Saturday, January 19, 2002 9:09 AM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Tom, Ian Just curious...where do you get $.16/Q EPS estimates? I took a = *very* quick glance at the last 10Q, are you basing this on the = acquisition in 2000? Katherine ----- Original Message -----=20 From: Tom Worley=20 To: canslim@lists.xmission.com=20 Sent: Saturday, January 19, 2002 12:25 AM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] I agree, Ian. My second trip on this stock has nearly made up = the loss from the first voyage. Looks more promising now than the first = time I tried it. Sequential growth particularly impressive. Tom Worley stkguru@netside.net AIM: TexWorley ----- Original Message -----=20 From: Ian=20 To: canslim@lists.xmission.com=20 Sent: Friday, January 18, 2002 8:01 PM Subject: Re: Re:ELTE (was [CANSLIM] Katherine-Opinion = please?] Thanks a lot for the chart analysis. The low volume during = the new high to $13.50, and the high volume/no progress days on 1/10, = 1/11, and 1/15 were the things that concerned me. I convinced myself = that the low-volume high was just a case of 'too much, too fast' off the = $5 October low. The recent high volume/no movement days are what concern = me. There shouldn't be much concern with P/E. The company = claimed that Q4 2001, and Q1 2002 were already filled with existing = backlog, and I figure that a minimum of $0.16 per Q is easy - so 4 = months from now, the ttm EPS will be at least $0.70 if not more, and the = P/E at current levels would be under 20. Given their industry group and = recent growth rate, a much higher price could easily be supported. But I = would like to see more signs of volume accumulation here.=20 After the next earnings report the IBD EPS ranking should go = over 85, and the RS is over 90 already, so it should start appearing on = IBD radar screens for the first time - including the weekend review. = Perhaps it will be a month or so before the next clear direction becomes = visible. Thanks again, Ian ----- Original Message -----=20 From: Katherine Malm=20 To: canslim@lists.xmission.com=20 Sent: Friday, January 18, 2002 3:36 PM Subject: Re:ELTE (was [CANSLIM] Katherine-Opinion please?] Hi Ian, Your question has me wondering whether the sell rules that = I follow translate perfectly to thinly traded stocks. But I'll tell you = what I see and the way I would read it if I were to own it: -After the B/O at 7.13, stock moves up and consolidates = for about 5 weeks. This is a "valid" consolidation so that makes the = previous base low 8.01 which was printed on 11/23/01. -Just as a quick check for "overextension" that means that = the stock is 70% above the 200dMA (7.02), 15% above the 50dMA (10.43) = and 49.6% above the base low (8.01). It gets a yellow flag for being 70% = above the 200dMA according to WON's sell rule #34, but does not get a = red flag for the Rubberband Sell Rule. -After the consolidation and breakout 12/18 the stock has = started to show signs of stress. This could easily be market related, = but no way to tell. -1/2/02: New high on low volume. Red flag. -1/10/02 & 1/11/02- two days with little or no price = progress on high volume. Red flag. -With 1 yellow and 2 red flags I thought it worth doing a = PE Extension check. I've reconstructed the PE at the time of the B/O in = October using trailing EPS numbers for the prior quarters. That puts it = at $7.13/$.29 =3D 24.59. The extension warning would then be a forward = PE of 24.59*2.21=3D 54.3. Let's see. DGO doesn't have any estimates, = which means it isn't followed by enough analysts. I checked the internet = to see if I could find anything and ran across this EPS/Rev snapshot: = http://yahoo.marketguide.com/MGI/mg.asp?target=3D/stocks/companyinformati= on/highlights&Ticker=3DELTE I am alarmed by the essentially flat revenues over the = last 4 years, so I am going to go with the EPS estimates in my = VectorVest software which reads a measly $.02. That puts the current = forward looking PE at $11.98/$0.02 =3D 599! I'll have to mark that Red = Flag. One note is that its industry is fairly healthy, = consolidating after rising, not overly extended and currently ranked in = the 2nd quartile. I'll let you take it from there! Katherine ----- Original Message -----=20 From: Ian=20 To: canslim@lists.xmission.com=20 Sent: Friday, January 18, 2002 4:40 PM Subject: [CANSLIM] Katherine - Opinion please? Would tuesdays distribution day for ELTE make you exit = the stock at this point? Do you have any other insights into the chart? I would appreciate your analysis - it is the one big = recent winner I am wondering what to do with. Based on all of my past = experiences, and knowing the companies outlook, my gut tells me that it = needs to consolidate here, but will run into the $20's by mid-year. But = I'd rather listen to the chart. I fear I've held it long enough that I = may be complacent. Thank you. Ian - ------=_NextPart_000_006E_01C1A140.3CE983C0 Content-Type: text/html; charset="iso-8859-1" Content-Transfer-Encoding: quoted-printable
Thanks for clearing this up Ian. Things like this can't be "seen" = in the=20 records available online. Just goes to show that with a microcap such as = this,=20 due diligence needs to be deep enough to uncover these clues. (And = conversely,=20 the same would hold for uncovering rats in the attic for other = microcaps!)
 
Have you made a decision as to whether to "sell on the technicals" = or will=20 you wait for the next earnings announcement and conference call?
 
The estimates I am using are from my VectorVest software. If there = are no=20 analysts covering, they use past EPS and "significant developments" to = make a=20 forward estimate. As I don't generally follow microcaps, I'm not sure = how=20 reliable these numbers are. When I wrote my note yesterday, that's why I = looked=20 at the historical Rev/EPS numbers myself before taking their low forward = EPS=20 number at face value.
 
One thing I did note in the financials from last quarter is that = they have=20 not been writing off some of their software development costs this year. = From=20 the 10Q 11/14/01:

Research and development expenses for this = year’s third quarter=20 of $1.7 million (or 9.4% of revenue) increased slightly from=20 $1.6 million (or 12.5% of revenue) in 2000. Such expenses for the = first=20 nine months of 2001 totaled $5.0 million (or 10.0% of revenue) = compared to=20 $4.4 million (or 11.0% of revenue) for the first nine months of the = prior=20 year. Research and development expenses consist primarily of salaries = and=20 expenses of the Company’s research and development personnel and = outside=20 consultants. The higher expenses in 2001 over the = same=20 period last year reflect costs for work to design and develop certain = products=20 to support the Company’s expansion into new Professional Services = Automation=20 markets, partially offset by reduced expenses for Elite.com. Research = and=20 development expenses exclude internally developed software costs that = were=20 capitalized totaling approximately $320,000 for the third quarter and=20 approximately $900,000 for the first nine months of 2001. No software=20 development costs were capitalized in 2000.

The increased R&D effort for EIS is expected to = continue=20 through 2001 as the Company completes development of its new product = lines. The=20 Company is committed to maintaining strong research and development = efforts so=20 it can continue to provide innovative software solutions as the needs of = its=20 customer base and target markets change.

Something like this would certainly make 2001 EPS numbers "look" = better when=20 comparing QoQ or YoY.

Katherine
----- Original Message -----
From:=20 Ian =
To: canslim@lists.xmission.com=
Sent: Saturday, January 19, = 2002 11:16=20 PM
Subject: Re: Re:ELTE (was = [CANSLIM]=20 Katherine-Opinion please?]

Katherine:
 
I have listened to the last 2 conference calls, = and=20 management paints a very different picture. The acquisition from last = year has=20 been negligible to overall revenues, and has not contributed to = earnings yet.=20 Rather, the fact that they are in a new product cycle, expanding=20 internationally, and are moving into new verticals, has been given as = their=20 reason for the recent growth. Moreover, they claimed last Q that = existing=20 backlog should make Q4 2001 and Q1 2002 comparable with the last 2 = quarters.=20 They also seemed confident that their customer base and recurring = revenue=20 stream had finally reached a "critical mass" that would ensure = continuing=20 growth. They weren't sure what exact growth rate they would have, but = they=20 were confident growth would continue.
 
Finally, they were confident that the Law Manager=20 acquisition from last year was finally about to contribute = meaningfully to=20 earnings.
 
In the face of this, it strikes me as odd that = there would=20 still be an active covering analyst with such low estimates. Maybe = that means=20 that the next earnings report (rumored to be on Feb. 11) will be the = one that=20 either breaks them, or sends them to a new level as they finally have = a share=20 price over $10 and a market cap over $100,000,000. We'll = see.
 
Ian
 
 
----- Original Message -----
From:=20 Katherine=20 Malm
Sent: Saturday, January 19, = 2002 6:48=20 AM
Subject: Re: Re:ELTE (was = [CANSLIM]=20 Katherine-Opinion please?]

Hi Tom
 
This is what I don't get, and I'm not trying = to be=20 objectionable, just trying to find out how you'd get = $.16/quarter=20 given the company's history. When I look at this, I see OK = growth in=20 revenues, but the company continuously has good and bad = quarters. I=20 noticed in the 10Q that they capitalize software development = and then=20 write it off in chunks every so often (not uncommon) and = it's=20 possible that these negative quarters every so often are = related to=20 that. I'm guessing if I were to dig further into the = financials I=20 would get to know them better. I know that they did an = acquisition in=20 2000, and I'd assume that the growth in EPS would be related. = I look=20 at Sept/Oct 99 and see really nice quarters just like the last = two=20 we've seen recently, but they are then followed by negative or = so-so=20 quarters. That raises red flags and would lead me to question = whether=20 the growth pattern shown recently can be projected into the=20 future.
 
Katherine
 
GROWTH RATES
1 Year 3 Years 5 Years
Sales % -11.70 15.54 -14.53
EPS % NM NM NM
Dividend % NM NM NM

REVENUE
Quarters 1998 1999 2000 2001
MAR 8,343 12,988 13,334 14,295
JUN 10,850 15,401 13,741 17,392
SEP 12,385 15,381 12,858 18,516
DEC 13,484 15,496 12,399
Totals 45,062 59,266 52,332 50,203
Note:  Units in Thousands of = U.S.=20 Dollars
 
EARNINGS = PER=20 SHARE
Quarters 1998 1999 2000 2001
MAR -0.070 0.010 0.050 -0.040
JUN -0.060 0.080 0.010 0.160
SEP 0.020 0.140 -0.020 0.230
DEC -0.030 0.210 -0.060
Totals -0.140 0.440 -0.020 0.350
Note:  Units in U.S.=20 = Dollars
----- Original Message ----- =
From:=20 Tom=20 Worley
To: canslim@lists.xmission.com= =20
Sent: Saturday, January 19, = 2002 8:27=20 AM
Subject: Re: Re:ELTE (was = [CANSLIM]=20 Katherine-Opinion please?]

Hi Katherine,
 
I see 16 cents as easy based on the last 4 = sequential quarters (last two were 16 and 23 cents). Sales appear = to be=20 accelerating thru Q3, so even a moderate slowdown in acceleration = should=20 still leave them well over 16 cents/qtr.
 
 
Tom Worley
stkguru@netside.net
AIM:=20 TexWorley
----- Original Message ----- =
From:=20 Katherine=20 Malm
To: canslim@lists.xmission.com= =20
Sent: Saturday, January = 19, 2002=20 9:09 AM
Subject: Re: Re:ELTE (was = [CANSLIM]=20 Katherine-Opinion please?]

Tom, Ian
 
Just curious...where do you get $.16/Q EPS estimates? I = took a=20 *very* quick glance at the last 10Q, are you basing this on the=20 acquisition in 2000?
 
Katherine
----- Original Message ----- =
From:=20 Tom=20 Worley
To: canslim@lists.xmission.com= =20
Sent: Saturday, January = 19, 2002=20 12:25 AM
Subject: Re: Re:ELTE = (was=20 [CANSLIM] Katherine-Opinion please?]

I agree, Ian. My second trip on this = stock has=20 nearly made up the loss from the first voyage. Looks more = promising=20 now than the first time I tried it. Sequential growth = particularly=20 impressive.
 
Tom Worley
stkguru@netside.net
AIM:=20 TexWorley
----- Original Message ----- =
From:=20 Ian
To: canslim@lists.xmission.com= =20
Sent: Friday, January = 18, 2002=20 8:01 PM
Subject: Re: Re:ELTE = (was=20 [CANSLIM] Katherine-Opinion please?]

Thanks a lot for the chart analysis. The = low=20 volume during the new high to $13.50, and the high volume/no = progress days on 1/10, 1/11, and 1/15 were the things that = concerned=20 me. I convinced myself that the low-volume high was just a = case of=20 'too much, too fast' off the $5 October low. The recent high = volume/no movement days are what concern = me.
 
There shouldn't be much concern with = P/E. The=20 company claimed that Q4 2001, and Q1 2002 were already = filled with=20 existing backlog, and I figure that a minimum of $0.16 per Q = is easy=20 - so 4 months from now, the ttm EPS will be at least $0.70 = if not=20 more, and the P/E at current levels would be under 20. Given = their=20 industry group and recent growth rate, a much higher price = could=20 easily be supported. But I would like to see more signs of = volume=20 accumulation here.
 
After the next earnings report the IBD = EPS ranking=20 should go over 85, and the RS is over 90 already, so it = should start=20 appearing on IBD radar screens for the first time - = including the=20 weekend review. Perhaps it will be a month or so before the = next=20 clear direction becomes visible.
 
Thanks again,
 
Ian
 
 
 
----- Original Message -----
From:=20 Katherine Malm =
To: canslim@lists.xmission.com= =20
Sent: Friday, = January 18,=20 2002 3:36 PM
Subject: Re:ELTE = (was=20 [CANSLIM] Katherine-Opinion please?]

Hi Ian,
 
Your question has me wondering whether the sell rules = that I=20 follow translate perfectly to thinly traded stocks. But = I'll tell=20 you what I see and the way I would read it if I were to = own=20 it:
 
-After the B/O at 7.13, stock moves up and = consolidates for=20 about 5 weeks. This is a "valid" consolidation so that = makes the=20 previous base low 8.01 which was printed on = 11/23/01.
-Just as a quick check for "overextension" that means = that=20 the stock is 70% above the 200dMA (7.02), 15% above the = 50dMA=20 (10.43) and 49.6% above the base low (8.01). It gets a = yellow flag=20 for being 70% above the 200dMA according to WON's sell = rule #34,=20 but does not get a red flag for the Rubberband Sell = Rule.
-After the consolidation and breakout 12/18 the stock = has=20 started to show signs of stress. This could easily be = market=20 related, but no way to tell.
-1/2/02: New high on low volume. Red flag.
-1/10/02 & 1/11/02- two days with little or no = price=20 progress on high volume. Red flag.
-With 1 yellow and 2 red flags I thought it worth = doing a PE=20 Extension check. I've reconstructed the PE at the time of = the B/O=20 in October using trailing EPS numbers for the prior = quarters. That=20 puts it at $7.13/$.29 =3D 24.59. The extension warning = would then be=20 a forward PE of 24.59*2.21=3D 54.3. Let's see. DGO doesn't = have any=20 estimates, which means it isn't followed by enough = analysts. I=20 checked the internet to see if I could find anything and = ran=20 across this EPS/Rev snapshot:
 
http://yahoo.marketguide.com/MGI= /mg.asp?target=3D/stocks/companyinformation/highlights&Ticker=3DELTE<= /A>
 
I am alarmed by the essentially flat revenues over = the last 4=20 years, so I am going to go with the EPS estimates in my = VectorVest=20 software which reads a measly $.02. That puts the current = forward=20 looking PE at $11.98/$0.02 =3D 599! I'll have to mark that = Red=20 Flag.
 
One note is that its industry is fairly healthy,=20 consolidating after rising, not overly extended and = currently=20 ranked in the 2nd quartile.
 
I'll let you take it from there!
 
Katherine
----- Original Message = - -----=20
From:=20 Ian=20
To: canslim@lists.xmission.com= =20
Sent: Friday, = January 18,=20 2002 4:40 PM
Subject: = [CANSLIM]=20 Katherine - Opinion please?

Would tuesdays distribution day for = ELTE make=20 you exit the stock at this point? Do you have any other = insights=20 into the chart?
 
I would appreciate your analysis - = it is the=20 one big recent winner I am wondering what to do with. = Based on=20 all of my past experiences, and knowing the companies = outlook,=20 my gut tells me that it needs to consolidate = here, but will=20 run into the $20's by mid-year. But I'd rather listen to = the=20 chart. I fear I've held it long enough that I may be=20 complacent.
 
Thank you.
 
Ian
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