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No. of Recommendations: 2
With CNXS exploding past $23 today to $24.41, I've officially reached my second HG two-bagger (the first being Mine Safety). Two of the most boring of the HG stocks ... I love it.

However, that said, I do have a valuation concern about CNS. As recently as April 18th, the stock traded at $14.15. Then they announced a good quarter on April 28th, and the next day the stock closed up $2.53 to $18.78. Subsequently, the stock has traded consistently over 100,000 shares a day to get to this point.

Currently, the EV of CNXS is $267M, with FCF around $12M (according to Yahoo ... I'm not always confident about their stats, but ...). That gives us a EV/FCF ratio around 22. That seems very optimistic to me for a business that hasn't been growing very fast. I'd personally like to see Fiber Choice continue it's growth run, along with either Breathe Right growing better or a third product showing promise before according this kind of valuation.

Has enough happened in the last two quarters to justify a double in the stock? Are we seeing the entrance of 1 or 2 institutional buyers who are a little overexuberant? Is Matt Richey backing up the truck to make himself look good? How high is up?

Any thoughts would be appreciated.



P.S. BTW, we have blasted past Matt's target price of $18-$21 by September 2006.
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