RJ Falkner recently reports:
"Based upon our $35-$40 million revenue estimate for 2008, we believe pretax profit margins can exceed 27% of sales. Assuming a 40% income tax rate and 17.5 million diluted shares outstanding, we now estimate that diluted EPS (fully-taxed) can reach $0.35-$0.40 in the year ending December 31, 2008."
Now this sounds great right! Yes, but it gets better. Last year RJ Falkner underestimated the sales of DGLY by over 20%! Now is this of any fault to RJ Falkner, absolutely not. DGLY is growing at a extremely rapid pace.
RJ Falkner also estimated an earnings of .12- .15 for 2007 but again these numbers were grossly undervalued. DGLY earned a diluted .28 for 2007 on 19.4 million in sales. The stock topped the year out at about $7.50 on .26 EPS for 2007 or a P/E of 27.
RJ Falkner calls for earnings of .40 for 2008. Keeping the same P/E would put the stock at $10.80. BUT we all know about RJ Falkner's rather un-aggressive expectations.
If sales are going to double as predicted by DGLY, could earnings double too? Sounds logical right? Well, .56 for 2008 sounds very reasonable.
Keeping the P/E of 27 for our target and adding a fiscal 2008 of .56 per share, my 12 month target for DGLY is $15.
Let's hope they blow away all expectations and prove my estimations as grossly undervalued as RJ Falkner's!
$8.82 (04/17/08)
