JDS Uniphase (JDSU) Message Board

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Technology Stocks : JDS Uniphase (JDSU)

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To: Lane3 who wrote (8859)	4/14/2000 8:36:00 PM
From: Michael Dean	Read Replies (3) of 24042

I've found that rule - P/E about equal to % growth rate to work pretty well. Your recent question on what a reasonable P/E for JDSU should be got me thinking whether there was some mathematical basis for this? Reasonable P/E should depend on: a) annual earnings growth b) number of years that one expects this growth to be sustained, c) discount rate (inflation) d) expectations for inflation (increasing/decreasing?) e) taxation factors (capital gains taxation vs interest) I did a really simple model assuming 46% growth 6% inflation and a time horizon of 10 years and came up with a 61x P/E. I expect that some formula exists somewhere in some text book somewhere covering stock price prediction for growth stocks. Can anyone point me to such a formula? It would sure be useful in trying to decide which stocks to purchase for long run once this blood-letting is over? T.I.A. Otherwise, I may just have to invent one! Mike

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