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Technology Stocks : All About Sun Microsystems
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To: evergreen who wrote (22615)11/9/1999 3:17:00 PM
From: cfimx  Read Replies (2) of 64865
 
i read this analysis and it makes little sense. sunw will be valued on EPS in f2003, not EBITDA or cffo. Based on projected growth rates of about 25% ( all analysts ) sun.com should earn $3.44 at June 2003. If the multiple STAYS the same, your return over four years is about 24.4% per annum. 78 x 3.44 = $268 in july of 2003. You should be PLEASED with that. The annual return from $112 to $268 is 24.4. But that presupposes two things: 1) the multiple STAYS at 77. 2) that sun.com can earn $3.44 in 2003.

Let's say we get back to NORMAL. I know I know. WE WILL NEVER HEAR SURF MUSIC AGAIN. But humor me. IF SUN.COM can earn $3.44 and that is a big if in 2003, then I would put a 30 multiple on that. Remember that this is about twice as high as historic norms. That works out to $103.20. Yes, in four years if sun.com trades at 30 times earnings ( according to the analysts estimates out now ) then it will trade at $103. Now if I do as this analyst says, and DISCOUNT THAT BACK AT 15%, what is the NPV Of SUN.COM?

The value using this method is $59. That's right $59. Correct me if i'm wrong but that seems to be perilously close to the value I derived for Sun.com using my other valuation method. Hmmmm.

PS: I am ignoring the noise from Proggy, crazy man..i mean JC, and tiger cub.
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