still learning: That sounds reasonable. But I don't know about your foward earnings number.
I just checked one of the earnings reporting services. WDC is valued at 8.4 times 6/99 earnings, and SEG is valued at 9.2 times 6/99 earnings.
The 3/99 forward earnings for QNTM are actually 3.24. So if you give QNTM the valuation of "the group" (which I agree is a debatable point) and put it at 9 times, you get 29 1/8 as a "fair valuation." So, yes, you could argue that it is $2 undervalued today at $27.
On any given day, though, just about any tech stock can be $2 below its "fair" value.
Then put a "current" p/e of around 11 on those forward earnings, and you get $35 a year and a half from now. (By then, though, those earnings will have been revised upwards, so this reasoning is faulty on that count.) But that problem aside, yes, that's about 30% plus over a year and three months, which is not a bad return at all.
And it could go much higher if the sector patches up its pricing problems. This is actually what I think will happen. But in a year? Two? Not even Sam knows. And don't forget, once the sector does patch up its pricing problems, it will take months before investors regain confidence that it will stay that way.
The main point on QNTM, though, is this. I think most of the bad news is out on the sector and QNTM has taken its hit. So it has little downside risk left at $27. My problem with the stock is that it also still has questionable upside compared with some other options.
BTW, does anyone know what a "fair" forward p/e is for the tape sector that QNTM is in? And who are the representative companies there? Sam?
Happy Investing!
Vanni |
