BWAC:
I sure we don't want to go here
Then why do? Honestly, the argument you raise is an obvious one, yet one that many in the market will dispute or CSCO would be dropping like a lead ball, particularly in the current environment we're where price valuation has been the focus.
Market Cap
You pontificate earnings as a sole measure of market cap. I guess you didn't really read my post. And maybe you haven't weighed in the valuations, both historic and even today, of many of the dot-coms that have NO EARNINGS.
But it's market cap is 500 Billion. That amount of 'money' or investment in essence is getting its owners a 'real' return in earnings of 2.6 Billion. Sounds great. But put another way that's .5%
I see you're a consultant. I'm a consultant and my client a highly educated individual with a JD, a MS in Taxation, an MBA along with a bachelor's gave me that same logic . . . as much as four years ago. Look how far the market has come since then. In short, the analysis you describe is limited since it is one dimensional with respect to time. Such limitation is critical especially with growth stocks where some of the market cap is based upon anticipated growth.
Now the stronger argument is that CSCO cannot continues its imputed growth (based upon price) forever. Eventually it will run into a flattening of revenue growth much as Dell as done in the past year. Dell is in the midst of refocusing its core markets. Can it reinvigorate its growth? If yes, it is the mark of a truly valuable company, much in the way I value ORCL.
But just think .5%? Eventually it all does come back to earnings. Eventually. Oneday. Someday
Eventually? Maybe, but more importantly, for how long? Markets are not static; they're dynamic. The virtual nirvana that you hope for will likely never be reached. The more likely scenario is somewhere in between, but not this year. CSCO held up well over the past few weeks. It doing well today. IMHO, it still has much growth ahead of it. The Internet is H-U-G-E, and CSCO stands to reap a large share of the billions it represents. When the internet's infrastructure is pretty much built out; when broadband with a throughput of 20-30M bps is pretty much ubiquitous to whomever wants it; when the backbone is sufficiently redundant to accommodate any lapses in sub-network failures much akin to the power grid, then I think I will agree with you that CSCO's market cap will retrench. But that day is not here, & will not be here for awhile. Hence, a market cap based upon present metrics will only continue.
JMO. |
