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Technology Stocks : DIGL... Digital Lightwave.... Making Waves....
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To: Craig Rogers who wrote (220)12/25/1997 7:29:00 PM
From: ahhaha  Read Replies (1) of 934
 
As you know instantaneous p/e is meaningless. The future earnings are the lynchpin. If the company earns $.50, then 144 ---> 25. The future expected multiple is the appropriate gauge. Price volatility is merely the degree of conviction that the projection is accurate. The variabiltiy of the projection due to changes in fundamental expectations cause changes in conviction and ensuing portfolio disposition adjustments. But it takes structural changes or efficiency improvements expressed in margin changes to alter the mean expected multiple.

Another measure is the ratio of expected growth to expected earnings. A value of 1 is fair for this measure. A value below .4 is very cheap and above 1 is expensive. Until discovery is well in place, this ratio stays constant. DIGL has this measure at maybe .25. If there is no fundamental change, this stock could really take off.
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