RE: [CANSLIM] VRNT and new offering

From: "Katherine Malm" <kmalm@earthlink.net>
Subject: RE: [CANSLIM] VRNT and new offering
Date: Mon, 26 May 2003 23:29:35 -0500

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Hi jans,

I wouldn't make that conclusion at all. You're assuming that the dilution of
earnings per share is permanent. The whole point of raising capital is to
support continued growth. They obviously see this as a means for *meeting*
the forward estimated growth rates (and possibly raising them). You may see
some dilution in the near term, but that should dissipate. For example,
let's say they use the capital for an acquisition. The additional revenues
and earnings generated from the acquisition would raise their growth rate.
Let's say they use it to buy a piece of manufacturing equipment that doubles
their productivity. That raises their profit margins, allows them to produce
twice the product in the same amount of time, and, if they sell the
additional units they can now produce in the same amount of time, increases
both revenues and earnings.

As to the math generally, it gets a bit complicated because EPS is computed
based on the average number of shares outstanding during the period. Just
for that reason alone, I don't think mathematically you could get away with
the kind of shortcut you're suggesting (though I don't know that for a
fact!)

Katherine

- -----Original Message-----
From: owner-canslim@lists.xmission.com
[mailto:owner-canslim@lists.xmission.com]On Behalf Of Spencer48@aol.com
Sent: Monday, May 26, 2003 9:15 PM
To: canslim@lists.xmission.com
Subject: Re: [CANSLIM] VRNT and new offering


Katherine:

     I may be wrong; I'm not sure (it's kind of late at night for me).
That's why I'm asking:

     The new shares being issued are about 20% (ie, 5Mill shares of about
24Mill).  The '03 earnings in DGO are est. at increasing 30%, and '04 at
27%.

     Therefore, is it kosher to deduct the 20% from the 30% and 27% (making
30-6=24% and 27-5.4=21.6%), instead of converting to dollar amounts first
and
then seeing how much  EPS increases?


In a message dated 5/26/2003 10:12:18 PM Eastern Daylight Time,
kmalm@earthlink.net writes:

<< The additional 5m shares will raise the total outstanding shares from
23.4
to  28.4m shares, so it's not quite as dramatic as it seems when you say
they're "doubling the float." While increasing the number of outstanding
shares by
5m will dilute the earnings, it is diluted across the total *outstanding*
shares,.. >>

jans

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