WHY NTAP is CHEAP all the way to $135: NTAP PEG ratio 1 to 6, means price should be 6x $23 or $133-$138. P/E compared to Growth is your PEG ratio, in other words is the price keeping up with the growth of earnings? If a company is growing fast, in an expanding market share, PEGs of more than 1 were, are, considered okay, like 2 to 1, or 3 to 1, since the price of a stock is the art of discounting what it will be worth, what it's STREAM OF EARNINGS will be worth. NTAP for example, although it has a P/E in the 80s, (compared with old SLOW growth or non-growth industrial smoke stack companies had P/Es like 20 to 30, or utilities were in the teens, like 15), and was this high for a P/E, no not at all especially in the HIGH FAST GROWTH TECH SECTOR, for example signing up more and more internet companies like VRSNs network solutions prior to the merger had P/Es in the 200 to 300 range, that is the price was over 200 times the earnings per share. Is for this okay, well sure, since they were signing up people and companies, and keeping them as customers for ever, and singing up more and more people, GROWTH WAS EXPONENTIAL. Now I forget what it was, but lets look at NTAP again, its earnings per share growth rate, is almost 500%, that is the EPS GROWTH is 498%, so comparing the P/E to this Growth shows a ratio LESS THAN 1, in fact about 1/6th about 0.17, but what you care about is the inverse of this number approx 6, the stock should be, IF THE COMPANY KEEPS GROWING EARNINGS, worth 6 times its current price, per the PEG calculation, in plain language, since STORAGE IS GROWING EVERYDAY, NTAP should go back up to $135 or so, maybe even back up to its recent 6 month high of $152 (which it should be noted happened after the great crash last March). Today NTAP is a featured stock on the Nasdaq, it is going up as predicted following emc's rise, all these storage stocks will do well, because everyone needs more and more storage, its a GROWTH stock. It justifies in my opinion a PEG over 1, which is no doubt why its stock was over $135 to $152 while the rest of the market was going down, then it was forgotten and deteriorated due to general market sentiment and declining drift to this bargain price, if you allow a PEG of 2, it could even go to well over $200 once the economy and markets fully recover. I am still buying more today, even though its up, is still CHEAP. a CORE HOLDING for sure.
I am,
Truly your$,
-Crystal Ball |
