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Technology Stocks : Advanced Digital Information Corp. (ADIC)
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To: BostonView who wrote (2075)9/1/2000 8:03:56 AM
From: Jim Oravetz  Read Replies (1) of 2283
 
Here is some info on the famous Mr. Murphy's validation methods. It's called Growth Flow.
"Growth flow(GF) is earnings per share plus R&D per share. His mantra is that companies who invest in their company will reap rewards (in terms of higher stock prices) down the road.

Take the earnings reported over the last 4Q's and divide by the number of shares (backward looking earning per share). Then take the amount the company spends on R&D during that same 4Q period and divide it by the number of shares. Add the R&D spending per share and the backwards earning per share and you have GROWTH FLOW per share.

Next, divide the current price by the GF number. "A P/GF ratio of 10x or 12x is normal. Anything under 8x starts to get our attention, and under 5x we really get interested. The P/GF ratio can get astonishingly low; e.g., under 2x."

FWIW, I'm be back later with ADIC's numbers.

Thanks for the link, BV

Jim
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