Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 2
Blitzen94,

Wow! Very nicely done. I have been following CNXS since it first came out as a Hidden Gem last September. I owned some shares for a time, but got out with a small loss with the recent bad news.

I like how you look at both high and low estimates of intrinsic value and then further consider what would be a low risk buy range that gives you a decent upside. My own analysis is very similar to your results. I have a intrinsic value of $15.25/share and my buy zone based on P/E history is less than $11.25/share. MFTomG also recommending CNXS as a buy at less than $14/share in Jan 04. So why haven't I bought anymore?

Well a couple of factors are keeping me on the sidelines for now. First, look again at your low end estimate of $9.54/share. Some of the assumptions you make could turn into reality if the company can't grow revenue consistently in the coming year (look at last quarters numbers for example). With a current price around $10/share, CNXS may already be fairly valued with little potential for upside.

Also, inventory growth last quarter really outpaced sales, which raises a red flag for me. There have been some concerns about the international market for CNXS that may be a factor in this inventory buldge. Finally, while not a proponent of market timing, small caps have taken a beating of late and CNXS has certainly not been immune to this. I'm not a big fan of averaging down and CNXS may still have some more downside to it in the current market.

So what am I waiting for? I would like to see a solid quarter of renewed earnings growth with inventory coming back under control. Of course good news could push the stock back up again above my buy zone before I have time to react, but I'm willing to sit and watch for now. CNXS just doesn't look like enough of a sure thing at this point for me.

Chris
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.