EARLY WARNING SIGNS

CWH Q4/04 RESULTS
While top-line growth remained robust (65%), bottom-line growth was a tad light (6.4%) and EPS actually fell by 20%. This was due to increase GSA expenses, expensing stock options, expensing deferred development costs, and increasing count of average outstanding shares. When stock runs up as much as CWH, there are a lot of in-the-money options. While the results were slightly disappointing, other metrics, (CF, BV, ROE) were all very strong. For year-to-year comparison, the growth profile remained intact. Valuation (P/E 27X, PEG 0.07) remains reasonable as long as CWH maintains its top- and bottom-line growth in the future.

AA
On the other hand, AA’s results were awful, missing everything despite the strong metal prices. On the conference call, management sounds defensive and uninspiring. I am a little concerned of its impact to AL’s stock, but more importantly, its implications to AL’s Q4 results. DNA also missed and AMD warned. The Q4/04 does not look to promising and that 15% growth may proof to high to reach.