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Strategies & Market Trends : Gorilla and King Portfolio Candidates

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To: substancep who wrote (42365)	5/3/2001 10:16:48 AM
From: Mike Buckley	Read Replies (1) of 54805

P, Isn't the 4.95 SEBL PEG for the next 7 quarters misleading if ERM revenues are not factored into the equation? Yes and no. The analysts are surely building their expectations about ERM into their models. Since they don't have much to go on right now, they're going to be loathe to build very much into the revenue streams until they see more data about product adoption. Remember that ERM is probably still in the pre-chasm stage. What it comes down to is that a PEG will always prove to be misleading if at some point in the future the assumptions that are built into it are proved to be bad assumptions, either on the low side or the high side. The big reason PEGs tend to undervalue an emerging or strong Gorilla is because the earnings picture tends to improve long after the period of time the PEG addresses. (Notice the operative qualifier, "tend." I didn't write "always.") --Mike Buckley

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