USRX Message Board - Msg: 137252

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Technology Stocks : USRX

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To: Jeng Chiu who wrote (371)	6/19/1996 9:22:00 PM
From: Jeff Raihanan	of 18024

You can't judge a stock by its P/E alone any more than you can judge the value of an employee solely on his/her salary. Whether or not an employee is over or under paid depends on his/her productivity relative to his/her salary. The same is true with stocks. Whether a stock is over/under valued depends on its projected growth rate over the next few years relative to its P/E. The rule of thumb is that the P/E should be less than a company's projected earnings growth (in percent) to be a good value. With that said, USRX's earnings grew by 122% this year. It is estimated to grow by 60% next year and 50% per year looking 2 to 5 years out. With the internet explosion, there is a very high demand for USRX's products. They have an excellent management team and a proven track record so these projections are well founded. Thus, the fair price for this stock is 50 to 60 times earnings. Right now, it's fairly priced (based on this year's earnings). When earnings are released (and if they are at least $2.32 as expected), the P/E will drop to 36 (based on today's price). The stock's P/E will rise to its fair value over time, so the $130 price target is within reason.

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