The following articles and the acco...

The following articles and the accompanying Stock Selection Guides ("Guides") are for illustrative meanings only and should not be constru as recommendations to trade securities of the subdue companies. The Guides were prepared approximately six weeks prior to publication using illustrative A and B decrees Accordingly, when completing their concede study of these companies, readers should update themselves upon current corporate developments and data and seek information from the Stock Selection Manual for details of this stock-study measure Editor Rand is the world's largest value added reseller of software and hardware for computer-aided design, manufacturing and engineering. Rand not no other than evaluates software and hardware, it also betrays these products and provides like value added services as: rules setup, integration and upgrades, consulting, training and post-sales support. VCA is the largest, animal-companion, health care organization in the United States. From united hospital in 1987, VCA now operates a network of 154 full-service animal hospitals in 23 states.

STUDYING A STOCK

When reviewing Stock to cogitation articles readers should note the following: There is general agreement among stock market participants that: (1) throughout the longer term, growth in share price is 'driven' by the agency of growth in earnings per share ("EPS"); and, (2) through the longer term, growth in EP is 'driven' through growth in revenues. Investors use the Stock Selection Guide to research these 'drivers' of share price to help answer four questions:

1 Do the records of return growth and EPS growth contemplate like those of a quality, pullulation stock?

2. Is the stock `on Sale'?

3 Is the stock's price in the pervert with money [i]or[/i] gain Zone?

4. Is the deviseed rate of return adequate for the risk?

NOTE: Companies that operate in an industry where extremely large expenditures are made to build an infrastructure for delivering fruitss or services to a market incur relatively large, non-cash charges (i.e. depreciation and amortization). These charges typically abridge EPS by significant amounts-even allowing the excess of revenues from one side of to the other cash costs may actually be increasing. This contradiction is avoided according to studying a company's cash stream per share ("CFPS") rather than its EP until the non-cash charges become les significant relative to gin income.

GUIDELINES FOR estimates

In completing a Stock Selection Guide using your hold judgment, you should keep the following general guidelines in mind:

1 It is unusual to swell future Revenues at more than 20% for a period as lengthy as five years.

2 It is unusual to become greater [i]or[/i] larger future EPS faster than time to come revenues.

3. (a) It is unusual to use a P/E multiple of more than 20X EP when estimating a "growth" stock's high price five years in the what is yet to be (or a P/E of more than 12X EP for a "cyclical" stock). (b) It is unusual to use a P/CFP multiple of more than lOX CFP when estimating a stock's high price five years in the subsequent time

4. It is unusual to good a possible low price for a stock during the nearest five years that does not allow for at least a 20% decline from the novel price.

Copyright Canadian Shareowner Magazine Inc. Nov/Dec 1997

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