Briefing.com on Ascend (9/16/97 14:25)
"ASCEND COMMUNICATIONS INC (ASND) 34 1/8 +1 5/8. So what's the deal with Ascend. Well, here's a Story Stocks perspective. First of all, the stock is darn cheap. Look up and down the networking sector, and you want find a major player that should elicit as much empathy. Want to compare P/E ratios: Bay Networks 39x FY98 estimates, Cisco Systems 28x, Cabletron 17.31x forward estimates, 3Com Corp 20x estimates -- ASND 18.85. However, a better indication of the stock's relative "cheapness" is to compare the valuations relative to expected growth. On a PEG ratio basis (price/earnings/growth), BAY 1.57 (looks a bit expensive doesn't it), CSCO 0.87, CS 0.69, COMS 0.80-- ASND 0.47. How about the current discount to the stocks' one-year highs: BAY 0.5%, CSCO 12.76%, CS 25%, COMS 40.5% -- ASND 57%. This stock has gotten crushed as analysts have yanked away their support -- by either downgrading the shares or lowering earnings estimates on fears that Q3 sales have been soft. In the event the company does come out with an earnings warning when it reports results around Oct. 10, let's be prepared by taking a look at the most pessimistic numbers currently forecast for ASND. Out of 26 analysts surveyed, the current low estimate for 1998 earnings is $1.60 a share. Based on this forecast, ASND shares carry a multiple of 21.3. Using the low long-term growth prediction of 30%, ASND shares would sport a PEG of 0.71, which would still make the stock cheaper on a relative basis than Cisco, 3Com, and especially Bay. So, for those willing to hold firm and ride out the waves, you will be hard pressed to find another stock with the level of humble appeal that ASND shares have been beaten into offering." |
