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Technology Stocks : THQ,Inc. (THQI)
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To: Quad Sevens who wrote (10069)3/1/1999 11:20:00 AM
From: Kory   of 14266
 
Wade,

In your assumption, with payout of 100% in dividends, it is appropriate to divide the interest rate of 5.55% into 100 to get the PE of 18, because you will receive the interest each year to re-invest as you see fit. However, as most tech stocks pay no dividends, they need an increase in earnings just to pay for the reinvested earnings.

Therefore assume a company with flat earnings and no dividend payout (i.e. actually getting worse as not generating a return on re-invested profits).

In this case you use the "Rule of 72" and divide the 5.55% into 72 to get a PE of 13.

Just something to think about.

Kory
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