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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 78.37

+1.3%

3:59 PM EST

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To: John Malloy who wrote (33268)	4/1/2000 9:52:00 PM
From: Gerald Walls	Read Replies (2) of 77400

Rather than worry about what P/E is appropriate for a stock that is growing as fast as Cisco, I prefer to calculate by discounted cash flow the most I can afford to pay for Cisco and still earn some minimum after-tax return. Cisco's value depends on how fast you forecast equity/share will grow and the price/book ratio will fall. Nice analysis, but, unfortunately, like all projections it's only as good as your assumptions. Plug in different numbers and you get wildly different results. I guess that's why we have some people screaming about how overvalued CSCO is while others are buying on margin. I bought Cisco three times in 1997, once just before The Great Tech Meltdown of '97, once about 2/3 of the way down about two weeks later, and once in the fall. My cost basis is under 8. Do you factor in holding period, initial cost, and taxes in your calculation or do you look at the current price only?

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