Replies to post #5331 on Value Microcaps Motherboard

[MikeDDKing]

Researcher, Wade re SWTX

They mentioned in the call that there were many special charges in 2004. If these charges were not there I think they said that they would have made 15 to 16 cents in 2004. I don't remember the exact number. So, earnings will not necessarily drop.

In the call they stated that income should be 9 or 10 percent to 13 percent of revenue. If we assume the 10 percent revenue increase guidance that they gave, use the 10% to 13% range, and assume that the diluted share count is the same, the income rage is in the 19 to 25 cent range.

I haven't had a chance to go back and look at the possibility of further increases in the diluted share count. They did say in the call that they don't have a need to do more equity funding.

I get the feeling that management is conservative in their estimates so I wouldn't be surprised to see them exceed their guidance.

One other nice thing in the press release is the significant balance sheet improvement. They went from a negative book value to $0.48/share.

Mike

[researcher59]

wade: SWTX

There are plenty of risks with SWTX, but I think there are fewer stocks than you imply with a forward PE of 5. Value is getting tougher to find these days. I've had most of my success with low PE stocks. In fact, I think the biggest winner from this board YTD is WGMGY, up over 200% since Jan 1. The PE was way too low on that stock, and the market has corrected for it ! Low PE stocks can be a bonanza, and I've benefitted greatly from this board. WGMGY is just one example.

Big revenue growth is not in the cards for SWTX. ASP's are dropping significantly for their plasma displays. But adjusted for special items, management indicated that EPS would have been $0.15 for 2004. If they meet the high end guidance of $0.25 in 2005, that's 67% bottom line growth with a PE of 5. Of course, that's an optimistic scenario, fraught with potential pitfalls. Who knows how high the price of Indium will go ? Q4 gross margins are at a peak partly due to special circumstances, and not likely to be repeated. But they're not forecasting 4x $0.10 or $0.40 for 2005. If they did, the stock would be zooming.

I'm not getting back into SWTX today, but may take a small position if it dips enough.