How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 479.20

+0.2%

Jan 9 9:30 AM EST

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To: vinod Khurana who wrote (3101)	9/15/1997 7:27:00 PM
From: ThomasG	of 74651

Microsoft historically has grown earnings by approx 28%-30% per year and have traded on a historical PE of 38 to 40. It has only been over the last 12-18 months that the PE has increased to 50 times earnings. This has been due to the higher earnings growth of 50%+ during the last 6 to 12 months. In a perfect world Microsoft should be valued at 28 times earnings = 28*$3.17 = $88.17 However, global brand names such as Coke, Heinz P&G have been consistently trading at 1.5 to 2 times their earnings growth. As a long time holder of MSFT shares , I use a valuation of PE of 38 to 40, which means that MSFT is fairly valued at $126.80. If MSFT returns to this level then they are worth buying again. I wouldnt pay too much attention to Microsoft management buying of MSFT shares. This is purely driven by the number of options that are about to be vested. ThomasG

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