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Technology Stocks : PMC-Sierra (PMCS)
PMCS 11.650.0%Jan 25 4:00 PM EST
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To: Harry Stein who wrote (3417)4/17/2000 8:32:00 PM
From: Trader Dave  Read Replies (3) of 3818
 
5x growth rate? By what measures? Using trailing earnings?

Perhaps PMCS is selling at a premium to its currently sustainable growth rate of 50% to 100%, but there will come a time when people realize that even P/E to growth rate is only a part measure of a company's worth if you look at the sustainability of those growth rates.

If coke has a 40 pe and can sustain 10% growth for 5 years and pmcs has a 150 pe and can sustain 60% growth for 5 years, you'll come out ahead with pmcs even with significant pe compression.

How is it sustainable? Design wins reflect an expanding footprint in the market, R&D expenditures are at the highest levels in the industry.

I agree that PMCS is mightily expensive and could easily be cut in HALF from these levels, but PMCS has continued to distance itself in execution and vision from all but perhaps a very small group (perhaps 2 or 3) comparable companies.

Perhaps this is too optimistic, but it is within the realm of possibility, if PMCS earns $1.80 next year that's a 90x multiple on 2001 eps and the company may well generate 90 percent growth. That's a PEG of only 1.0.

But PMCS is understating its true financial performance, with R&D at around 24% of revenues, the prospect for continued design wins looks pretty decent to me.

Every buyer looks heroic today, but profits (and losses) aren't booked until they're sold.

I would have hoped this market fired a warning shot on the dangers of margin buying and speculation, but I guess not.

TD
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