Foolish Forecast: Dear Daktronics

Big-screen specialist Daktronics (Nasdaq: DAKT  ) reports first-quarter earnings tomorrow morning, so we're here to give you the big picture ahead of the event.

What analysts say:

• Buy, sell, or waffle? Seven analysts follow Daktronics, and they have a unanimous buy rating on the stock. Our Motley Fool CAPS community is a bit less enthusiastic, handing out an unspectacular three-star rating based on input from 313 players and our magic formula.
• Revenues. $124.3 million would calm those unruly analysts, and the official word from the company is in the $120 million-$130 million range. Last year's revenues landed at $92.2 million.
• Earnings. The Wall Street consensus says $0.14 per share, up from $0.12 a year ago. It's smack in the middle of management's guidance range, which goes from $0.09 to $0.16 per share.

What management says:
Daktronics reorganized its operations into five reportable units instead of three, as of the start of fiscal 2008. CEO Jim Morgan said that the change should lead to "greater flexibility and accountability within the major parts of our business," and that the change has been in the works for about a year to ensure a smooth changeover.

What management does:
There's no arguing with results, and there's plenty of growth going on here. That growth doesn't sacrifice margins, either, which makes it even better. The only weak spot is the declining cash flow trend. Management is aware of that problem, and is working on several improvements in "manufacturing, purchasing, collections and payment" processes, with an eye to improving cash flow.

Margins	1/2006	4/2006	7/2006	10/2006	1/2007	4/2007
Gross	30.0%	30.4%	29.9%	29.6%	29.5%	29.3%
Operating	8.2%	10.3%	9.6%	10.3%	10.7%	8.5%
Net	6.0%	6.8%	6.5%	6.6%	6.8%	5.6%
FCF/Revenue	(2.8%)	4.2%	4.9%	(0.6%)	(4.4%)	(10.2%)

Y-O-Y Growth	1/2006	4/2006	7/2006	10/2006	1/2007	4/2007
Revenue	23.6%	34.3%	34.9%	44.8%	47.1%	40.0%
Earnings	0.2%	33.9%	39.7%	64.0%	66.3%	16.5%

All data courtesy of Capital IQ, a division of Standard & Poor's. Data reflects trailing-12-month performance for the quarters ended in the named months.

One Fool says:
I called Daktronics a terrible investment back in December, based on an overblown valuation. The share price dropped more than 40% from that day and then rebounded a bit last week. But even at a 30% lower price compared to late December, the stock still isn't cheap, sitting at a trailing P/E ratio of 44.

This is one of those hyper-growth-story stocks that has returned such massive profit growth to its investors that it seems to demand a price premium. If you bought Daktronics stock five years ago, you'd be sitting on a tidy 470% return -- with 10 years in the rear-view mirror, it's almost 40 times your original investment.

But you could get some serious high-fliers at a much more reasonable relative valuation. According to Capital IQ, 22 stocks have pulled a 20-bagger trick or better over the past 10 years, and only two -- Amazon.com (Nasdaq: AMZN  ) and Celgene (Nasdaq: CELG  ) -- carry loftier P/E tags than Daktronics. Here, have a look:

	10-Year Return	Market Cap (Billions)	Trailing P/E
Apple	1,767%	$108.7	35.3
Best Buy	2,582%	$21.4	16.6
Quality Systems	2,436%	$1.1	33.4
Asta Funding	3,809%	$0.48	10.2

All of these stocks meet the twenty-bagger criterion. Sure, some of them have grown into their breeches by now, but that argument doesn't hold water when looking at Quality Systems or Asta Funding. So Daktronics is still a long way away from earning its valuation.

Read on:

• The Worst Stock for 2007: Daktronics
• The Next Home Run Stock
• Stocks Everyone Says to Buy Now

Quality Systems, Best Buy, and Amazon are current Motley Fool Stock Advisor recommendations. Best Buy also caught the eye of our Motley Fool Inside Value team. You can check out any newsletter free for 30 days by signing up for a trial run.

Fool contributor Anders Bylund holds no position in any of the companies discussed here, but he wishes he had bought into all of them 10 years ago. Where's that DeLorean when you need it? You can check out Anders' holdings if you like, and Foolish disclosure is the prognosticator of prognosticators.