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No. of Recommendations: 2

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.

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