Didn't find the Forbes article on Internet, BUT did find it in the magazine'..I've typed it entirely, except for the figures they have used on the chart. If anyone is interested, I'll try to get the numbers they used on the chart on the board. Thanks Bobby for alerting us....I would be really interested in comments on this article....Especially the last sentence....
KLP
TO QUOTE:
Forbes Magazine October 4, 1999 issue
Page 138
Under: Statistical spotlight
Virtual finance
What matters in valuing Internet stocks?
Look at things like the ratio of price to sales and projected sales growth.
By: Robert J. Sherwood
Article:
Is Yahoo really worth $171 a share? What about Go2Net, trading at $70? Forget about conventional valuation yardsticks, such as the price/earnings ratio. Few startup Web firms have profits worth mentioning. If you want to speculate in this sector, you have to come up with something else to value the stocks. We turned to Lorraine Wang, associate investment strategist for Morgan Stanley Dean Witter, for help.
Wang, to her credit, is no runaway bull. She says that in many cases even lofty earnings and sales forecasts can not justify current stock valuations. But she finds a few Net stocks worth looking at.
Wang pays a lot of attention to the price/sales ratio. She uses latest 12 month sales and consensus long-term sales growth projections. Internet stocks march to their own drummers, with an average price/sales ratio of 64. (Compare the S&P 500 index at three times sales.) But some of them are a lot cheaper than that.
Earthlink Network and USWeb/CKS, for example. Thanks to a falling stock price and rising sales, Earthlink, an Internet service provider, has a PSR of 6, or 49% lower than its level of a year ago. Yes, that?s cheap, she says, for a company likely to compound its sales revenue at a 63% annual rate over the next three to five years.
USWeb/CKS, a Web consulting firm, goes for seven times latest 12-month sales. Wang says it's worth a lot more. Its sales growth should come in at 80% a year over the next several years.
So what's overvalued? Go2Net, a portal site, has $15 million in recent sales, a $70 price and a market value of $1.8 billion. Wang things the share price ought to be under $10.
UNQUOTE
KLP NOTE:
There is a chart on this page titled Digital filter: Internet picks and pans based on price-to-sales and projected sales growth.
Chart says Overvalued:
CNET
Go2Net
Inktomi
RealNetworks
Yahoo
Chart says Undervalued:
Concentric Network
Earthlink Network
PSINet
USWeb/CKS
Verio
This Chart list sources:
Morgan Stanley Dean Witter, IBES International and Interactiave Data via FactSet Information Systems.
msdwdco.com
deanwitter.com
vaultreports.com
This shows some info re Morgan Stanley Dean Witter from a possible employment point of view?.
forbes.com
October 4, 1999
Couldn't find the article online, so I've typed it here. |
