How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 486.96

-1.0%

3:59 PM EST

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To: Wizard who wrote (8520)	6/18/1998 3:23:00 PM
From: Reginald Middleton	Read Replies (1) of 74651

Please don't read too much into the gross numbers. The point that I was trying to get across was that the EPS number as reported (which is actualy more complex than change in earnings due to the dilutive effects of securities, share buybacks, etc.) have less of a relationship with market value on the date of reporting, (lagged by one day in some cases) than seems to be commonly held. I have received a lot of requests for multivariate analysis and various regression analysis. These reports were generated with a web driven database and Excel 97 querying application. I am currently enabling the application to perform multivariate analyses etc. on the raw data of about 4000 companies and will have it available for beta download shortly. <Also, what is your conclusion? Should you run regressions once a company has been public for X amount of quarters to see what works best and then invest in those with discernible patterns?> As for conclusions, I have chosen not to state any. I did have a hypothesis/hunch (actually I knew:-), that EPS and raw earnings as well had a much weaker relationship with market value than widely believed and I simply decided to run a simple analysis on a broad variety of equities to see if the result supported my guess. What was surprising was how much of a role book value played over cash flow in many instances. I do not want to give advice, but barring an advanced (and unbiased) analysis of this subject proving the contrary, one could say the moral of the story is to judge each company on its individual performance patterns and avoid the use of a single macro-measure as a proxy for market value. Each market sector, and each company within that sector has unique characteristics with which the market uses to judge value.

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