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Technology Stocks : All About Sun Microsystems
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To: cfimx who wrote (42062)3/15/2001 4:47:37 PM
From: Prognosticator  Read Replies (4) of 64865
 
Twister: a P/E ratio is important only to companies which distribute earnings as dividends. Companies which reinvest and grow like crazy can have astronomical P/E ratios, and are still not overvalued in any sense.

SUNW was in the second of these situations, I don't see SUNW moving into the first for quite some time (unlike your favourite up there in Redmond), so most of the time P/E ratio is essentially irrelevant for tech stocks. It only becomes important when forward looking sentiment assumes that growth will stop, which is the current situation with the unwashed masses. At which point the P/E ratios of all companies tend towards the reciprocal of the current interest rate set by the fed, which is roughly 5% right now implying a P/E ratio of 20. A 150 point basis drop in interest rates, which will be coming in the next few months, will push this value to 30, which means that SUNW is now valued as if it will NEVER EVER GROW AGAIN.

Satisfied now twit? Good, let's get back to calling each other names, you idiot.

P.
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