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Technology Stocks : DIGL... Digital Lightwave.... Making Waves....
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To: RetiredNow who wrote (869)10/27/2000 6:07:58 AM
From: BayTay  Read Replies (3) of 934
 
So, are we buying?

With no earnings growth (or decrease), DIGL earns $1.00/share for the upcoming year to yield P/E of 51. If earnings grow at 15% per quarter, DIGL earns $1.25/share and current stock price yields P/E of about 40. And, if we average the earnings growth for the most recent 4 quarters (30%) and apply that to the next 4 quarters (e.g. no change to earnings growth), DIGL earns $1.55 next year and current stock price yields P/E of about 33.

So, off-hand, if we choose 15% growth per quarter (1/2 of average of past 4 quarters), we have a P/E of 40 for a stock growing the bottom line at 70%+ per year. If the 15% is a good assumption, we have an undervalued stock and "we" are buying.

However, the analysts are projecting $1.03 for next year indicating essentially no earnings growth for next year. So, if they are right with the estimates, we shouldn't see much growth for this stock over the next year and we should put our money elsewhere. On the other hand, if the estimates are too low... sigh... in such a booming industry, I have a hard time accepting no earnings growth from this point on.

Can anybody help with my feeble attempt to figure out what to do? I sold this stock earlier in the year in the $130's and I'm trying to decide if I should be getting back in.

Bret

Bret
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