Ready To Go From Mousy To Blonde?

Styles On Video (SOV), a company that makes a computerized beauty-imaging system, doesn't seem to be delivering a pretty picture of itself to investors. Its shares, trading at nearly 14 in May, are down to 71/4. Yet the company says its business is strong: In the third quarter, earnings jumped 156%, to $1.4 million, or 30 cents a share. And it said it signed contracts with 40 hospitals in Hong Kong and China for another product--its Forever Yours baby-picture setups.

But the short-sellers find the figures hard to believe. They claim they are misleading. For instance, in the second and third quarters, less than half of reported revenues came from actual sales of equipment. Most items were nonrecurring. So the shorts question the quality of earnings reported. But the bulls are adamant that the company is going gangbusters. Who's right?

Annelise Wetzel, an analyst at Thomas James Associates, expects revenues of $16.5 million this year and $30 million next, up from $8.5 million in 1993. Her earnings projections: $1.11 a share this year and $1.55 in 1995, up from 1993's 54 cents. The bears are betting the expectations won't be met, although the company insists they will.

Styles on Video's computer system lets an operator produce a videotape showing how a client would look with different hairstyles and hair colors. A similar system portrays a person in a variety of clothes and glasses. Styles on Video has signed a pact with Redken, a major supplier to hairdressers, to sell its systems to Redken salons nationwide. Wetzel is also excited by the baby-picture business--which involves installing digital cameras in hospitals to take photos of newborns. In the U.S., 10 hospitals have signed up for such services. Wetzel says the stock at this price is undervalued.

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