Winners Circle

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EOQ Play: SNTO

SNTO repriced options last year, and now has to account for them as compensation expense if its stock price rises. Last Q, PPS rose from $4 to $12 and caused a 31 cent pro forma profit to turn into a 12 cent GAAP loss. Folks didn’t understand it, and sold off the stock. This quarter, a drop in PPS from $12 to $8 will cause GAAP earnings to exceed the pro forma eps because part of last Q's compensation expense will have to be reversed. One theory is that funds are holding off buying until the end of the June quarter to assure that this happens, and then will buy in July before the great earnings report comes out. May be a nice, quick swing trade.