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Technology Stocks : Dell Technologies Inc.

DELL 122.55

+4.4%

Nov 21 9:30 AM EST

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To: jbn3 who wrote (25238)	12/16/1997 1:36:00 PM
From: James H. Irwin	Read Replies (2) of 176387

Projected growth rates are more important than historical, as a look at the ORCL chart will tell you (put any tech name in there you want) For example: Q1 Q2 Q3 Q4 1996A: 50 cents: .07 .11 .15 .17 1997E: 70 .12 .15 .21 .22 1998E: 1.00 .17 .21 .29 .33 that equates to an approximate growth rate of 40%. Many institutional investors would consider a $40 target for the stock all things being equal. But say that 4Q1996 is now going to come in at .18, not only does the sequential growth diminish but generally you can extrapolate that growth rate to next year's 1.00 estimate: lets say that the company slows to a 30% grower so that 1997 earnings are .66 and 1998's estimate is 1.3*.66= $0.86. Valuation of target: 30 x .86 = 25.75 or lets say $26. This is an example of what can and has happened. A slight contraction in the growth rate effects not only the earnings but the multiple you would pay for those earnings. Hope this clarifies. As always I bid you a prosperous day and bon chance. Jim

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