Hi Jaytee,
When it comes to P/E I would say that the company be in
line with the industry group for the stock. Yes, there are
some companies that lead the pack and are selling at a
premium. WAG is one that falls into that group. Personally,
I would not invest in that company for fear of a serious
pull back if the company disappoints the street. I look for
undervalue beaten up stocks. ORCL, MOT, NOVL, BTGC were
three stock that took a beaten and eventually came back
strong. At one point, those stocks were selling at a much
undervalue price. DIS is one that is in that condition
right now. It dirt cheap as indicated below and Toy Shop II
is doing well in box office sales going into the 2nd week.
NYSE: (DIS : $27 13/16) $58,100 million Market Cap December
6, 1999 Ranks 44th in the Fortune 500 on Revenue & 36th on
Profit. Employs 117,000. Trades at a 46% Discount PE
Multiple of 40.3 X, vs. the 74.3 X average multiple at
which the Diversified Media SubIndustry is priced.
Earnings per share is relative and growth rate varies. I
like it when the growth rate exceeds the P/E. In the case
of DIS, we are looking at a 14.34% growth rate at this
point. With some surprises and cost cutting and an
increased P/E of say 65% x .69 EPS (FY2000) it would yield
a fair stock price of around $44.85. I would settle for
$40.00 plus stock price, the DIS dividends, and three round
of CCs with a 15% profit each round. The question is, will
DIS deliver? That is the risk we all take.
So, growth rate? If you go for conservative stocks you will
get lower P/Es and growth rates. More speculative stocks
will give you higher growth rates and P/E that make your
blood pressure rise. DOX is one for the books. A 38% growth
rate and a sky high P/E.
NYSE: (DOX : $35 5/8) $5,679 million Market Cap at December
6, 1999 Trades at a 60% Premium PE Multiple of 51.6 X, vs.
the 32.3 X average multiple at which the Data Processing
SubIndustry is priced. |
