<<So with a forecast growth of 25%-30%and some negative sentiment primarily
based on the RBOC's cutbacks in capital spending, why would PAIR trade at a PE of 130??>>
Joe, there is no reason for PAIR to trade at a PE of 130. Here's the way I normally view PEs, although the market will sometimes dictate different. I look at the company's EPS growth for the current year. In the case of PAIR it is 25%. A reasonable PE is about 25. If you look at Yahoo, some analysts think, as hard as it may seem, that these internet companies will grow 100+%, hence PEs of 130. So assuming from a current Zacks's report on PAIR, a median EPS of 0.85, we get 20 11/16 / .85= 24.3. At a PE of 30, PAIR will be .85*30= 25.5. I think we'll see telecom equipment trade at a PE of at least 35 by year end. Last summer during "irrational exuberance", we hit a PE of 50 for PAIR. So the way I see it, as a worst case PAIR will be around $29.75. Hope this helps, let me know if you need some clarification.
Regards,
Marc |
