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Technology Stocks : Compaq
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To: Harry Landsiedel who wrote (3888)7/9/1997 10:50:00 AM
From: Thomas Dremel   of 97611
 
Harry, I will continue to use EPS vs "owner earnings". The Street looks at EPS - and the price should follow. I agree that modifying EPS for cap spending and deprec. comes closer to cash flow - which is a better indicator of performance than EPS. I'll keep it simple and stick with EPS. I like your analysis of CPQ over the next 5 years - and generally like to be conservative also. Your analysis comes up with a near double for CPQ - which is fine with me. The only problem with your analysis is your using a historic high PE of a little over 16 in determining 5 yr target price. I believe the PE will expand to near 20 as market rewards CPQ's long term growth potential of 20%.

Good investing,
Tom D
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