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Technology Stocks : PairGain Technologies

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To: trouthead who wrote (5159)	6/24/1997 4:43:00 PM
From: Chuzzlewit	of 36349

Brian, the method is quite simple, and you can use a calculator to do it. Step 1. Get the eps estimate for the comming 4 quarters (you can use any of the published analyses for this). Step 2 Obtain an estimate for the long-term (5 year) expected growth rate of eps. Again, this is frequently published. Step 3. Multiply the results in step 1 by the results in step 2 and that result by 100. That will give you the value of a fully-priced growth stock that pays no dividends. Step 4. To set a price target, you must first obtain the quarterly appreciation rate of the fully valued security. This will be the the 0.25 root of the sum of the growth rate plus one. Subtract 1 from the result. Example, if a company is expected to grow at eps at 50% per annum the quarterly growth rate is 10.668%. (1+0.5)^.25 -1=.10668 Simply use this number as a compounding factor based on the current fully valued price. That is, you expect the price to increase each quarter by 10.668%. Off topic: Going to see the M's after the 4th. We sure could use better relief pitching, though Ayala's come around nicely. I'd give up one of our sluggers for an ace middle reliever. Regards, Paul

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