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No. of Recommendations: 3
Can a short be entered? InVision Technologies (INVN) makes bomb detectors. It's stock soared from single digits to 47 after 911 and the shoe bomber, but not on increased orders or profits. In the low 30's, it's PE is 400. To justify the valuation, everything has to go perfectly: the FAA has to order bomb detectors for every airport, foreign orders have to come in, little business can go to competitors, and no one else gets FA certification. The toughest part is even if the company increases production as much as they hope, that's 50 units a month, which is not even close to the 2,000 machines the FAA is expected to want plus foreign orders. It might use contract manufacturers, but how much will that cut into margins? how many more people do they have to hire to install and service these machines, and how long to train them? To make matters worse, they've had some poor results in tests. To be contrarian, analysts whose companies make a market in the stock have rated it a buy AFTER it rose. Sounds tech-bubble like. In brief, this is a strong company but hopelessly overvalued stock which soared on speculation and is doomed to a serious decline.
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