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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: surpow who wrote (22598)	4/12/2000 8:56:00 PM
From: John Stichnoth	Read Replies (2) of 54805

To expand on Mike's points: Few analysts today look at trailing earnings as an indicator of a stock's value. At the very least they look at forward 12 month earnings. The consensus on QCOM's earnings for the year ended 9/2000 is $1.07. For 9/2001 it is $1.39. This would give forward P/E's of 117 and 84, respectively. (The multiple shrinks fast as you go out in the future with fast growers). Additionally, it is reasonable to look ahead further--as long as you can be reasonably certain that earnings estimates will bear some semblance of similarity to reality. In QCOM's case, it is very easy to believe the analysts' estimates of 35% compounded annual earnings growth over the next 5 years. (In fact, many around here believe the analysts are still low). If you believe the 35% number that would give a forward 5 year earnings number of $4.67--and a 5 year forward P/E of just 27. It is the confidence that higher earnings will be realized further in the future that allows gorillas to be priced at higher multiples than non-gorillas. Hope this isn't beating a dead horse with answers to a question you didn't want to ask. Best, John

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