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Technology Stocks : 3Com Corporation (COMS)
COMS 0.00130-67.5%Nov 7 11:47 AM EST
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To: Glenn D. Rudolph who wrote (12835)12/31/1997 2:52:00 PM
From: craig crawford  Read Replies (1) of 45548
 
<< The PE I pulled out of the air. I have not recently looked at earnings estimates since the dust
settled after last earnings. How is that for being honest?? I ought to look<G> >>

I think COMS is forecast to earn somewhere around a $1.08 for 1998 and a $1.98 for 1999.

A price of 15 for COMS on $1.08 gives them a PE of 13.8
A price of 15 for COMS on $1.98 gives them a PE of 7.6

Of course I don't think the market will award a PE of 7.6 to COMS anytime soon but 13-14 is possible. Of course most people are looking out to 1999 earnings on this company since they are already in the '98 year fiscally so people aren't making valuation judgements on the $1.08 number. They are looking at the $1.98 number. COMS is trading at 18 times 1999 estimates. I think that is more than fair considering 1997 was a disaster and '98 looks to be a slow year with growth in the 20% range for networkers. Maybe COMS consolidates and doesn't drop much further but I don't see a huge upside. I see no reason to grant COMS a PE of more than 20-25. If you give COMS a PE of 25 on 1999 earnings you get $49.5. I guess that's where some of COMS supporters are coming up with a $50 dollar price target.

My contention is COMS might earn a $1.08 for fiscal '98 but won't earn $2 for '99.
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