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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!

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To: Herm who wrote (5354)	10/9/1997 12:53:00 PM
From: Douglas Webb	of 14162

I have a question about P/E ratios: I'm trying to predict INVN's price after their earnings report, which should be at the end of the month. I figure it must be possible to estimate where the price would go based on their current PE, estimated earnings, and a range of possible actual earnings they will report. Yahoo reports INVN's PE at 353.13 with EPS of 0.04 on their main quote page, and PE = 424.24 with EPS of 0.03 on their profile page. Main Quote Page: $14.375 / $0.04071 = 353.13 Profile Page: $14.00 / $0.033 = 424.24 StockSmart reports INVN's PE at 29.1, with an EPS for 1997 of $0.49e. $14 7/16 / $0.49 = 29.5 They also report 1997 earnings estimated at $882, and a capitalization of $25,988. (Thousands, presumably) $882 / $25988 $14 7/16 = $0.49* So here's the question: INVN's earnings for the past twelve months is about $0.04. Their quarterly earnings for this year are $0.07 Q1, $0.14 Q2, $0.14e Q3, and $0.14e Q4. (There was a $0.17 loss in Q3&4 last year.) How do I figure out where the stock price will go if earnings continue rising rather than staying steady? Even if they stay steady, the PE has to drop a long way from ~400 (trailing twelve months) to 30 (1997 est) to keep the price near $14.50. Which will change faster, PE or price? Doug.

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