How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 478.52

-2.8%

3:59 PM EST

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To: PMS Witch who wrote (25003)	6/26/1999 6:38:00 PM
From: Gerald Walls	of 74651

If one buys a share today, at $85, they would get $1.30 in earnings, (My estimate) this year, and $1.301.3 next year and $1.301.3^n for future years. Using a 'safe' investment, such as treasury paper at 6% as a base, one must discount these future earnings to today's value. One is left asking the question "How long does it take for me to get my money back?", or, more appropriately, "Which stocks give me my money back the quickest?" Remember, we're dealing with equivalent purchasing power and not dollar amounts. We're now looking at a formula: $1.31.3^n = $851.06^n The generalized formula for finding the payback time n is... Quoting your formula: eg^n = E G^n where e - company 1 earnings g - company 1 earnings growth E - company 2 earnings G - company 2 earnings growth n - time period n = log(E/e) where log is log base (g/G). n = log(E/e)/log(g/G) where log is any other base.

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