This will make ANYONE bearish! I've updated all 100 NAZ stocks P/E's. LOOK American Spirit! You will
find that they are VERY high right now. I got these from yahoo just now,
so they might not be "perfect" but they are close enough.
From: StoxRider Sunday, Apr 1, 2001 4:12 PM
Deconstructing the Nasdaq 100
30-Mar-01 00:14 ET
[BRIEFING.COM - Gregory A. Jones] Like us, you have probably read those articles that mention that the Nasdaq 100 price/earnings ratio is still a
lofty 100. Like us, you have probably wondered about the origins of that P/E -- what do the P/Es on individual Nasdaq 100 stocks really look like.
Unlike us, it's not your job to go do that kind of legwork. So we had better get to it.
There are all sorts of ways you can look at Nasdaq 100 valuations, and all sorts of arguments that can be made to support overvaluation,
undervaluation, or perfect valuation. We're not going to get into those arguments today -- we just want to offer you some different looks at the
valuations of the 100 individual stocks.
The Overall P/E
Though you might have thought we just pulled that 100 P/E figure out of a hat, that is in fact the current P/E for the Nasdaq 100, based on trailing
twelve month earnings and Thursday's closing prices. Outrageous, you might think. But it's not as bad as it sounds. We arrive at this P/E by adding
total prices and dividing by total earnings. The problem is that some companies are losing considerable amounts of money, and therefore skew the
entire calculation.
Another way to look at the Nasdaq's P/E is to look at only the stocks that have had earnings over the past 12 months. Of the Nasdaq 100 stocks, 81
have been profitable over the past year (excluding charges), while 19 have not. For those 81 stocks that have made money, the P/E is a much more
reasonable 33. That's not cheap, but it's not 100 either.
One other way to look at the NDX valuation is to calculate the P/E based on forward earnings. This can be a very dicey game, however. Current
earnings projections are in freefall, so a forward P/E that looks reasonable today might be quite rich tomorrow. Furthermore, it is difficult to compare
apples with apples. What you would like to see is future earnings estimates that all cover the same period. In reality, you tend to get estimates for the
next fiscal year, whose end-date can vary from early 2002 to early 2003. That's far from ideal. Nevertheless, we calculcated the Nasdaq 100
forward P/E for the 85 stocks that are expected to make money next year. The result: 28. Again, not absurd, but not what you would historically
consider cheap.
The Individual Stories: Past
We also wanted to see a ranked list of the Nasdaq 100, to get a sense of which companies were keeping the P/E high. The list of high P/Es was
surprisingly long. First, we present the trailing twelve month P/E for the 81 profitable companies, ranked from highest to lowest.
HERE IS THE P/E AS OF TODAY
Ticker P/E =========================
ERTS 374 293
EBAY 126 253
GMST 125 N/A
IDPH 124 140
BEAS 105 811
PMTC 101 298
CIEN 86 126
VRSN 85 N/A
NOVL 84 141
JNPR 76 78
PSFT 73 60
VRTS 72 N/A
PAYX 59 56
ITWO 58 N/A
PALM 57 74
MERQ 57 68
AMGN 56 54
MEDI 55 59
SBUX 54 69
CHKP 54 77
CEFT 51 52
QCOM 51 362
BRCD 51 54
CHIR 50 411
INKT 50 N/A
SEBL 50 137
AAPL 49 19
CNET 48 N/A
IMNX 47 53
SPOT 46 70
NTAP 44 56
BBBY 43 46
GENZ 41 78
CMVT 40 44
INTU 40 19
TMPW 40 78
MXIM 39 41
RNWK 38 N/A
LLTC 37 29
FISV 36 34
BGEN 36 33
AMCC 35 N/A
RFMD 35 91
BMET 34 36
CTXS 33 52
ORCL 33 14
XLNX 33 21
DELL 32 32
BVSN 32 N/A
YHOO 32 N/A
VTSS 31 116
MSFT 31 34
CTAS 31 32
BRCM 28 N/A
COST 28 27
ERICY 28 20
ADBE 28 35
JDSU 27 N/A
MOLX 27 29
RATL 26 50
SPLS 24 109
PMCS 24 66
TLAB 24 20
QLGC 24 40
ALTR 23 21
CSCO 23 40
SUNW 23 25
CPWR 23 30
CMCSK 23 19
MCHP 22 22
KLAC 21 21
SANM 19 27
FLEX 19 24
NVLS 18 27
ATML 18 18
AMAT 17 17
CNXT 17 N/A
INTC 16 21
ADCT 15 7
SSCC 13 14
WCOM 11 13
PCAR 8 57
Next, we rank the 19 companies that lost money last year. Since you can't calculate a meaningful P/E ratio without earnings, we opted for a P/S, or
price/sales ratio (calculated using Thursday's market cap figure divided by trailing twelve month sales). The perils of P/S ratios are by now
well-known, and we wouldn't recommend comparing a P/S on a telecom company with the P/S of a biotech company. It's a meaningless comparison.
But we wanted some way to rank those that are losing money, so here goes.
Ticker P/S
HGSI 202.5
ABGX 34.1
MLNM 28.2
MFNX 15.5
VSTR 12.6
EXDS 6.4
LVLT 5.3
ARBA 5.0
DISH 5.0
MCLD 4.0
XOXO 3.2
ATHM 2.9
ADLAC 2.5
NXTL 2.0
USAI 1.9
AMZN 1.3
CMGI 0.7
COMS 0.6
Note that the companies in the "loser" camp tend to hail from three sectors: telecom services (9), Internet (4), and Biotech (3). COMS and USAI are
the only stocks that don't fit into these three categories. In the case of telecom services and biotech, initial investments to build networks or develop
drugs tend to lead to losses in the early years. That doesn't mean these stocks are cheap, but it helps to explain the lack of earnings.
The Individual Stories: Future
This is where we get into dangerous territory: forward P/Es. The following table of the 85 companies is based on expected earnings for the coming
fiscal year. As noted before, there are two problems here. First, the fiscal years vary quite a bit, so this is not a straight apples to apples comparison.
Second, some of the "cheapest" stocks are stocks that are widely expected to warn soon, and whose estimates haven't yet been adjusted as a result.
They include companies such as: BRCD, QLGC, and TLAB. They may turn out to be cheap after all, but there is a significant risk that their forward
estimates will be cut (and P/Es will rise) in the near future. Despite those caveats, this is nevertheless an interesting list.
We were particularly surprised to find that Internet stocks still command a premium, despite the fact that the Internet's hockey stick growth curve
assumption no longer appears valid. CNET, ATHM, YHOO, and EBAY are all high on the list, and of course AMZN doesn't even make this list yet
due to lack of earnings.
Ticker P/E
PALM 800
COMS 190
RFMD 188
SPOT 129
DISH 85
CNET 84
ERTS 78
ATHM 74
YHOO 68
EBAY 53
IDPH 52
PAYX 45
IMNX 44
BEAS 42
AMCC 41
CHIR 41
AMGN 41
XLNX 38
SBUX 36
VTSS 36
PMCS 36
KLAC 36
CIEN 36
VRTS 35
MERQ 35
QCOM 34
RNWK 34
AAPL 33
VRSN 33
GENZ 33
INKT 33
BBBY 32
MEDI 32
NOVL 32
NTAP 31
MCHP 30
BRCM 30
CEFT 30
JNPR 29
MXIM 29
BGEN 29
BMET 28
JDSU 28
MSFT 28
INTU 28
CMVT 28
ALTR 28
ORCL 28
SEBL 28
DELL 27
ITWO 27
INTC 27
LLTC 27
PSFT 27
ADCT 26
FISV 26
CTAS 26
CHKP 26
AMAT 25
BRCD 24
MOLX 24
COST 24
ERICY 23
CSCO 23
ADBE 22
SUNW 22
CTXS 22
RATL 21
NVLS 21
TMPW 20
ARBA 19
GMST 19
BVSN 18
SPLS 17
QLGC 17
PMTC 17
WCOM 16
TLAB 15
CPWR 15
PCAR 14
FLEX 14
SANM 13
ATML 12
SSCC 7
And finally, the 15 companies that are expected to lose money in their next fiscal year, ranked by P/S ratio. All the usual warnings apply for both
forward estimates, fiscal years, and P/S ratios.
Ticker P/S
HGSI 91.7
ABGX 38.9
MLNM 21.9
VSTR 4.6
CMCSK 3.6
MFNX 2.9
LVLT 2.0
MCLD 1.9
ADLAC 1.9
CNXT 1.8
EXDS 1.6
USAI 1.3
NXTL 1.1
XOXO 1.0
AMZN 0.9
CMGI 0.7
Expensive or Cheap?
This exercise does not offer an easy answer to a tough question: is the Nasdaq 100 still overvalued? But it hopefully helps all those who were
pondering that question to examine the facts more closely. While the trailing P/E (ex-losers) of 33 doesn't sound that bad, the list of individual stocks
still reveals some breathtakingly high trailing and forward P/Es. This doesn't guarantee declines for those stocks, but the experience of the past few
months is that whichever stocks are near the top of the valuation list tend to be the most vulnerable.
Greg Jones - gjones@briefing.com
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