AppSwarm Inc (SWRM)

[valuemanager]

Sponge -- SNWT is not a growth stock. The revenue growth is by acquisition (which has to be paid for = reduces your equity as a long investor).

Jerry Siegel calculated during the dotcom bubble that only the fastest growth stocks are worth 60 times earnings (exception are startups that don't have a running business yet, e.g. biotech startups, which is why they are so popular with stock fraudsters, see HBSY - "Human Biosystems").

60 times earnings, not a percent more. Therefore, the current 300 times earnings of SNWT (estimated, admitteldy) are way too high (meaning the stock is way overpriced)!! Even if you believe that the economic crisis is finally over (which is obviously isn't and will not be for years to come).

And the recreational vehicle business is (a) a capital intensive business (meaning growth is expensive, unlike in the softwarre industry, for example), (b) in the currently shrinking discrete consumer industry. Read the recent SEC filing to find out how management was worried about survival and shrinking revenuew.

The glory of recent acquisitions is just a window dressing measure to pump up the price. Good for you if I am wrong. Not entirely impossible, however I have deeply analyzed several hundred stocks and err in less than 15%. This case seems to be very obvious to me. Time will tell.

If you want to learn about the shareholder value earning capacity of revenue growth by acquisitions, google warren buffet and acquistions. You will be quite shocked. Nevertheless, even Wall Street analysts get easily foolfed for some time by merger hungry CEOs.

Disclosure: No position in SNWT or MSFT.