SWTX CC highlights
I listened to the call, though somewhat casually, since I no longer own any stock, but was impressed by the Q4 results. Here are a few key points :
- Share count 32.7M as of 12/31, and expected to grow no further.
- Guidance for '05 is for 10% revenue growth, or more if new customers come onboard. Working against the revenue growth are declining ASP's of displays (-20% to -30%) in a very competitive sector. But unit sales should be up sharply.
- Net Income is expected to range from 10 to 13% of revenues ... hence EPS guidance of $0.19 to $0.25 for the year. If they make the high end, that's a forward PE of under 5 based on today's closing price of $1.18. And management surprised to the upside in Q4, so maybe they're being overly conservative. But the future is tough to predict in this sector ...
- Indium has grown to 20% of COGS due to a 10-fold rise in the price of this metal over the last 2 years. Now selling at $1000 per kilo. Company is exploring alternative metals, but it's at least a year away from application.
- Plentiful NOL's, so little or no taxes for several years.
- CAPX spending to rise to $1M in '05 from $400k last year.
- Q1 is seasonally weak with lower revenues and tighter margins ... so don't look for a repeat of Q4. Gross margin guidance is for low to mid 30's.
I may buy back into this stock on weakness, but it could rally tomorrow based on the big Q4 surprise. I may wait for their seasonally weak Q1 results before I get back in. Good luck to all shareholders of SWTX !
