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ADC Telecommunications ADCT is a communication equipment manufacturer located in Minneapolis Minnesota USA Since 1952 the company has successfully weathered the tumultuous transformation process of technology Today ADC Telecommunications exclusively focuses on manufacturing computer-networking equipment Increasing demand for fiber optic transmission systems like asynchronous transfer mode ATM synchronous optical networks SONET and most wireless communications systems provide significant opportunities for ADCT The company currently focuses on enabling communications service providers to deliver high-speed services to residential and commercial customers The following is an annual analysis of ADCTs financial ratios of years 1995-1999The averaged priceearnings PE ratios for ADCT are 36 363 394 275 and 641 for years 1995-1999 respectively The PE ratio for ADCT is very stable from 1995 to 1997 In 1998 the PE ratio fell over 43 to 275 The PE ratio then rocketed to 641 in 1999 a 57 increase in one year This dramatic increase indicates current investors are placing more value on future earnings as compared to previous years One-reason ADCT investors pay more to own the stock is the growth potential in the communication equipment sector For example Internet traffic doubles every 100 days illustrating the growth potential for ADCTs sales and bottom line earnings Annual Report 1999 Investors are currently willing to buy the stock at an inflated price due to two main reasons the companys future earning potential and present growth rate in the industryThe returns on assets ROA ratios for ADCT are 920 1140 1160 1130 and 520 for the years 1995-1999 There were no ROA industry averages in the Almanac of Business and Financial Ratios written by Leo Troy ADCTs ROA ratios remain constant around11 from 1995 -1998 In 1999 ROA dropped 54 to 520 This decline indicates that ADCT may not be utilizing its assets properly One explanation for the 1999 decrease is ADCTs acquisitions For example ADCT purchased Broadband Access Systems for 225 billion exchange of stock Datek 2000 Recent acquisitions require additional
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