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Technology Stocks : Cascade Communications (CSCC)
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To: Robert Scott who wrote (3372)4/4/1997 9:13:00 AM
From: Andreas Helke   of 3743
 
[About growth and PE]

I think your whole concept is flawed that the complete investment in a company should paid off from profits. This would only be realistic if the company would suddenly become absolutely worthless after 8 years. In that case you would expect that you not only get your money back but also on top of it interest on your capital. In reality after 8 years we will have a bigger company with reduced growth prospects which would still have a PE between 10 and 30. Your target of a 25 fold increase - 8 years of 50% growth - was reached after 72 months by Cisco and after 34 or 21 months by Ascend.
Of course I do not know if the projected 5 year growth rates of 47% for Cascade and 44% for Ascend will come true. Cisco managed to grow about 80% a year since its IPO. Up to now the estimates tended to be revised up and were still beaten by the actual numbers. But I do not know if we now have a temporary slowdown or a totally altered competitive landscape with deteriorating margins.

Andreas
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