July 14, 2003 Echelon Corporation (ELON)
Hello Friends! Thanks for stopping by the site. Please be sure to check out all the entries and different aspects of Bobsadviceforstocks! I spent the weekend updating the sites and then went out to my old Delphi stomping ground where I had my first website and put up a note to visit...so hope some of you are from Delphi as well!

Anyhow, back to business. The market is having a GREAT day today and the bull is still alive. This is the best environment for our earnings/price momentum stocks.

Looking at CNN.Money for the top percentage gainers today I came across Echelon Corporation. This is a new one for me. I do not own any shares nor does anyone in my family. ELON is having a terrific day trading at $17.05 as I write....up $2.38 on the day or 16.22%!

ELON, according to CNN.Money, "...develops, markets and supports hardware and software products and services that enable original equipment manufacturers and systems integrators to design and implement open, interoperable, distributed control networks." Hmmmm....I guess that means it is a 'networking' company.

The news suggests the company is due to report earnings tomorrow. Last quarter, their first quarter, came in on April 15, 2003. As reported in the NYTimes on the Web, revenues for the quarter were $32.6 million an increase of 18% over revenues of $27.6 million for the same period in 2002. Net profit was $4,217,000 or $.10 per share compared to a net profit of $2,687,000 or $.07/share last year.

The nice part of that earnings report was that EXPECTATIONS were for $.07/share and the company came in at $.10. The expectations are paramount in the investment world. That is why stocks often drop on meeting expectations as the news is 'built in' to the price in anticipation of results.

Morningstar.com shows a pretty picture on five year results with nice revenue growth from $32 million in 1998 to $40 million in 1999, $49 million in 2000, $77 million in 2001, and $123 million in 2002. At the current rate, ELON should come in at least at $128 million extrapolating from the current quarter for 2003.

Free cash flow while not linear is doing fine. In 2000, ELON was negative $(8) million which went to a negative $(33) million in 2001 but a positive $35 million in 2002.

The Assets/Liabilities picture is very clean for this company as reported on Morningstar. They apparently have $134.5 million in cash alone compared to $12.3 million in current liabilities and only a mere $0.2 million in long term liabilities. ELON has an additional $34.1 million in OTHER current assets.

Looking at Yahoo.com, we find that ELON has 39.9 million shares outstanding and 27.2 million which float for a market cap of $584.8 million.

The p/e ratio is a little steep at 32.60 and this stock has a potential short squeeze coming....if the stock rises and those borrowed shares that have been sold short should need to be covered (puchased and returned to the original owner)...the stock could rise precipitously. As of June 9, 2003, Yahoo reports that 18.0% of shares outstanding are short which amounts to 4.91 million shares with a ratio of 26.51 trading days to cover.

There are LOTS of things to like about this stock....and if I were looking for a new purchase, this would be a great one to recommend.

Thanks again for stopping by and please leave comments right here or contact me with any comments, questions, or what I love, words of encouragement at bobsadviceforstocks@lycos.com.

Bob