Trader J's Inner Circle Message Board

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Strategies & Market Trends : Trader J's Inner Circle

NVDA 188.23

+0.1%

Nov 7 9:30 AM EST

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To: Londo who wrote (45764)	8/12/2001 1:48:17 PM
From: LTK007	Read Replies (2) of 56532

this bit from above article should be right into your strong point.The calculations--<<Moving away from PEG component flaws, the big-picture flaw is twofold. The first is that it ignores interest rates. Evaluating the appropriateness of a P/E -- assuming it were a relevant benchmark -- is impossible without an interest-rate factor. In a 4.5% interest-rate environment, a 20 P/E may be borderline reasonable, whereas the same company can be grossly overvalued at a 15 P/E in an 8.5% interest-rate environment. A relevant judgment on P/E simply can't be made without an interest-rate factor. An intrinsic P/E can be calculated by working mathematically from a basic discounted cash-flow model. You divide the target price by the base EPS used to start the series and create a model P/E, but the key number is still the interest rate.>> end quote.

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