Compaq Message Board - Msg: 2856364

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Technology Stocks : Compaq

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To: Wally Mastroly who wrote (9999)	12/2/1997 1:43:00 PM
From: Douglas Rushkoff	Read Replies (1) of 97611

Kurlak from MSN: Compare Compaq and Gateway on these grounds. Compaq's gross profit margin is 27%; Gateway's 19%. Compaq's return on invested capital is 18%; Gateway's 12%. That means that not only did Compaq generate more cash flow in 1996 -- $1.6 billion versus Gateway's $313 million -- but Compaq was able to reinvest it 50% more profitably. Compaq's greater earnings stability completes the picture. Compaq has managed to consistently surprise analysts by about 5% a quarter over the past five quarters. Gateway's most recent surprise was reporting an 8-cents-a-share loss in the September 1997 quarter when analysts were expecting an 11-cents-a-share gain. In this market, I'd go with the quality stock that's down 25% rather than speculating on a Gateway bounce.

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