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Technology Stocks : Intel Corporation (INTC)
INTC 48.32-0.8%3:59 PM EST
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To: Jorj X Mckie who wrote (171684)10/21/2002 2:54:30 PM
From: GVTucker  Read Replies (1) of 186894
 
Good enough. 1995 earnings were $3,566mm.

If you use the 10% discount factor and the 5% earnings growth rate in my pervious example, you'd get a market cap of $71 billion, about 20% below the current figure.

To fix the numbers to get to the current market cap, all you'd need to do is cut the discount rate by 1.25% or raise the long term growth rate by 1.25%, or some combination thereof. And a 6.25% long term growth rate of earnings for Intel isn't too unreasonable; neither is a long term discount rate of 8.75%.

My point here isn't as much to state that Intel is a screaming buy as it is to show that anyone buying Intel here is making a decision on some pretty rational assumptions. That wasn't the case three years ago; the assumptions used by most people to value Intel were irrational at that time.
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