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Technology Stocks : All About Sun Microsystems
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To: Bob Kim who wrote (50570)7/22/2002 3:26:34 PM
From: Elroy  Read Replies (4) of 64865
 
Is Sun Cheap Enough Yet? Not Necessarily....If Sun meets our F2003 earnings estimate of $0.13, its next twelve month P/E still looks expensive compared to historical trough ranges. At its price of $4.25, the P/E is almost 33X. If we assume a strong rebound in profits to $0.28 in F2004, the P/E would be a more attractive 15X but that’s too uncertain to invest on today....

Shows his foolishness. PE is a peak valuation tool, and is useless in determinging "floor values" because companies usually don't have much earnings when they are near their floor value.

Sun is clearly inexpensive. Sun's price to trailing 12 months sales is about 1x, whereas EMC (pure play tech company going through the same restructuring process as Sun) is about 3x, and Sun turned profitable before EMC, and Sun has higher gross margins (and therefore higher value add) than EMC. On that basis (compared to EMC), Sun looks pretty cheap, or EMC looks pretty expensive. Both compete primarily with IBM and HPQ.

Problem with analysts is that they do their analysis to support their recommendation instead of vice versa. If he doesn't like Sun he is going to figure out a way to say its expensive no matter what.

Can anyone else find another tech company with 40% gross margins and break even or better operating results that trades anywhere close to 1x trailing sales? If so, please post the ticker.

Elroy
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