Novellus Message Board - Msg: 17143546

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Technology Stocks : Novellus

NVLS 2.400

+2.1%

Jul 24 5:00 PM EST

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To: LemurHouse who wrote (3305)	3/3/2002 2:16:25 PM
From: Andy H	Read Replies (2) of 3813

Admittedly, using current earnings may be shortsighted. However, I have trouble seeing value using peak earnings with a reasonable multiple. Valuation upon peak earnings for the next cycle needs to show a discount for the risk of nonattainment (competition, future demand and execution affect this risk) and time value of money. NVLS had a peak run rate of $3.24 using q4 2000 earnings (though it didn't come close to that number for any four consecutive qtrs). Using a 15 PE gets you to today's price. To buy here, you have to believe the PE should be higher and/or the max earnings will be much higher. In the great cycle peaking in early 1996 (stock prices peaked in Aug 95), AMAT's peak price of 119.875 represented a PE of 15 on its peak quarter for that cycle (apr 96). Given the cyclicality of this business, I like the 15 PE on max earnings to figure price targets. I welcome thoughts of what NVLS can earn (and by when) in the next cycle and what an appropriate PE should be used.

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