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Technology Stocks : QUANTUM
QNTM 10.60+5.1%Dec 9 3:59 PM EST
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To: Rob S. who wrote (5720)11/26/1997 1:26:00 PM
From: still learning  Read Replies (1) of 9124
 
Points well taken. Net-net I think wse are on the same page (you and I) b-- there must be some discount of future earnings, it only depends on how much (see PEG discussion below).

However, my original point was'nt claiming we have hit a new valuation paradigm, but rahter, to try to answer the question of "when are we far enough in delivering next year's earnings to deserve to be more highly valued even based on historical valuations -- and specifically what will it be worth in 6 months.

I still think that at 12-13X forward PE it IS discounted, but will not argue the point except to say the PEG discount is what counts. If QNTM's PE is growing at 20-25% a yr this year (FY98) and next (FY99, then at 50-60% of PEG we have a well-discounted # -- or 12x current year PE (which would be FY99 by then). By June we are a third of the way into FY99.

Truism in a nutshell: At some point past earnings do impact the price even at 9X PE (9X would be 33.21). QNTM using Vanni's #s would be at FMV in the mid to low 30s, not 27-28.

A PE of 5 marked a low-water mark and unless anyone is submitting we are as bad off today as 2 years ago, I think it should be disregarded in this valuation process. You mentioned a time horizon of Feb 98 and I'm looking into May/June 98 and projecting returns with anywhere from 23-67% appreciation, depending on whose model you want to use.

FWIW -- I have a 3-5 year horizon so I am not looking for an exit strategy or price point.
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