Compaq Message Board - Msg: 1716663

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Technology Stocks : Compaq

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To: Harry Landsiedel who wrote (3732)	7/7/1997 8:16:00 PM
From: Thomas Dremel	of 97611

Harry, you took the words right out of my mouth. I was going to use 97 EPS as my base year (since we're about 1/2 way through the year) Taking 97 EPS of 6.50 at a 20% growth rate - I get 5 yr projected EPS of $16.17. At a high PE multiple of 16.5 - I get a 5 yr target price of $267. This is close to a total annualized return of 19%, with the stock meeting the NAIC criteria of at least doubling in 5 yrs. BTW, I didn't do a SSG yet (so I don't have the upside downside ratio). The target price was figured with my finance calculator, but should be about the same as the SSG. Important note - IF CPQ grows at a 20% clip, the PE multiple should expand from it's current high PE of 16- 16.5 (ala DELL). We could then see a possible 5 yr target of $16.1720=$323 - near a triple in 5 years! On a sober note, CPQ is trading at 17.5 times forward earnings (6.517.5=114). This is about at it's historic high in terms of PE multiple. It might be the market is finally rewarding CPQ with a better PE than it's historic (there's not many companies trading at a discount to it's growth rate, 20% EPS growth rate vs 17.5 PE multiple). Glad to see somebody else is looking at the long term vs the nonsensical short term approach. Tom D

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