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Technology Stocks : Trading TAVA
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To: John Hanzl who wrote (35)2/19/1998 9:29:00 AM
From: Skeptic  Read Replies (2) of 655
 
There will be a paradigm shift that requires us to re-evaluate how we assign multiples in the next couple of years.

One of the few things in finance that is universally accepted is that the value of an investment is the present value of future cash flows. You can argue endlessly about the timing and magnitude of cash flows and the appropriate discount rate, but not about this basic tenet.

Investors are willing to pay multiples of current earnings because those earnings are expected to grow continuously. This is obviously an invalid assumption for Y2K earnings. The value of Y2K earnings cannot exceed their sum in any paradigm.
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