December 9, 2003 Comtech Telecommunications (CMTL)
Hello Friends! I was in a Yahoo chatroom yesterday drumming up stock market ideas and was chastised about using "friends". O.K., I really don't know you but if you are stopping by and reading my posts you ARE my friends! Anyhow, please remember to consult with your own investment advisor before taking any action on my posts, because since you are a friend, you should know that I am an amateur investor, and that the stocks I discuss may or may not lead to profits or losses and may or may not be suitable for you!

Anyway, I came across Comtech Telecommunications (CMTL) while checking the list of largest gainers today. CMTL is trading as I write at $30.89 up $3.72 or 13.69% on the day. I do not own any shares of CMTL but am tempted to jump in and buy a few...
According to money.cnn.com, CMTL "...designs, produces and markets sophisticated components & systems that are used by telecommunications, defense systems and service providers in a broad range of applications."

Yesterday, December 8, 2003, after the close of the market, CMTL announced results for their first quarter of fiscal 2004. Sales for the three months ended October 31, 2003, were $56.3 million vs $31.3 million for the three months ended October 31, 2002. This is about a 60% increase in sales!

This was all reported on Yahoo.com as picked up from a BUSINESS WIRE story. Net income for the quarter was $5.7 million or $.37/share vs $.8 million or $.07/share last year.

Looking at Morningstar.com, we find that revenue has grown (almost uninterrupted except in 2002), from $37.9 million in 1999, $66.4 million in 2000, $135.9 million in 2001, $119.4 million in 2002 (the hiccup), $174.0 million in 2003, and based on the first quarter, they are currently doing over a $200 million rate for 2004.

Earnings, unfortunately, have been quite inconsistent with $.77/share in 1999, a loss of ($.46)/share in 2000, and $.80 in 2003. The $.37 in the first quarter of 2004, if this continues, we should see over $1.20 in 2004.

Free cash flow has increased recently from $2 million in 2001, $6 million in 2002, $22 million in 2003. The balance sheet as reported on Morningstar also looks quite healthy with $48.6 million in cash comparted to $46.3 million in current liabilities and $0.4 milion in long-term debt. In addition CMTL has $72.5 million in other current assets.

Looking at "key statistics" on the Yahoo.com website, we find that the market cap is a small $331.72 million with a trailing p/e of 39.39 and a forward p/e of 23.83 (fye 31-Jul-05). The PEG ratio isn't cheap at 2.03, and the price/sales is reasonable at 2.18.

There are 13.95 million shares outstanding with 11.70 million of them that float. As of 11/10/03, there were only 632,000 shares out short representing 1.785 trading days...so not a lot of negativity on this stock. No cash dividend is paid but the stock recently split 3:2 on 7/15/03.

Maybe I haven't met a stock I don't like, but this is the kind of stock worth my attention. In fact may add to my trading portfolio...at only 24 issues...but will wait and see. The p/e isn't too cheap, the PEG is at 2.0, but the free cash flow is nice, the balance sheet is perfect, and the latest quarter was spectacular. So maybe this IS a good investment?

Anyway, I hope I have given you some food for thought. Or at least for discussion! Thanks again for stopping by, and if you have any questions, comments, or words of encouragement, please feel free to email me at bobsadviceforstocks@lycos.com

Bob