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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Bruce Brown who wrote (43522)6/15/2001 2:04:43 PM
From: Seeker of Truth  Read Replies (2) of 54805
 
Bruce, your point is of course good. On what should we base our EPS? I think we can't use prior estimates. Take SEBL, for example. The earnings for this quarter according to Yahoo's reporting of FIRST CALL, a broker average, will be 13 cents a share. Multiplying by 4 we get 52 cents a share as the hypothetical EPS for the next 12 months. As for the long term growth rate, let's assume 25% because that number was bandied about in an earnings discussion between SEBL management and analysts. On one hand there will be recovery, on the other hand the closer the market gets to saturation the slower the growth rate for most companies in most industries. Software might be different but software was not spared in this mini-depression so the "build once sell a million times" advantage may be cancelled out by other factors, e.g. low priced poor substitutes touted to the unwary etc. etc. At the current price we get a P/E of about 78. We take into consideration that the P/E of money is now about 25. I assume that eventually the stock will sell for about the then prevailing P/E of money. You can see that about five years of 25% growth are already in the stock price. So it looks overpriced to me. Of course I'm no savant; there may never again be a chance to buy it this low. But I'm staying out. I can imagine Mike Buckley wincing at my stupidity but Mike, we only have the brains we were born with.:-) Mike holds on until a PEG of five is reached. Maybe I'm misquoting.
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