NTAP $62-$133 fair valuation. Okay, lets do some math, I'll reduce your growth from 50% to 30% more in line with NTAP conservative recent growth guidance. But lets also look at Fed or Treasury rates at less than 5%, say 4.5% even though they will drop lower to zero (the rate equal to inflation, which may be 3% or less if Japan's history is our model). Now lets do a little computation, discounting one year off of 5 years, to be fair. NTAP at the present price of $26 shows a P/E of about 112. Lets be a little more pessimisstic to be fair to those short selling bears out there who can't wait to criicize my numbers anyway. Okay, growth projected forward 1 (for 100% of where you are at any time) plus .30 (30% growth) = 1.30, to move to next year and the next and the next, multply out 1.30 x 1.30 x 1.30 x 1.30 = 2.85 (285% growth over period). However, deflate for inflation, here our treasury rates or Fed rates, of 4.5% average for the same term going forward, okay, 1.045 x 1.045 x 1.045 x 1.045 = 1.19 (119%). 2.85/1.19 = 2.3
take the current price of $26 x 2.3 and you get $62.26 fair value. Take 112 x 2.3 = 257.6, 257.6 P/E x 0.52 (your earnings estimate) = $133.95 fair value. Thats about right, the stock should be $62 now, and $133 next year. |
