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Technology Stocks : Compaq
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To: Xpiderman who wrote (20432)3/7/1998 10:14:00 PM
From: Paul Brimhall  Read Replies (1) of 97611
 
CPQ Valuations:

Historical 5 Yr YTY EPS Growth for CPQ: 48.56
If one uses a projected 5 Yr Comp. Growth Rate of 20:

Benjamin Graham's Theoretical Price is: $51.90/Sh. or 48% Undervalued. (Of course it fails all of BG's other criteria.)

Using the Buffett Model the 10 Year After Tax Compounded Rate of Return for Compaq: 16% (Historical ROE Avg of 22.3%)

Another good valuation model shows a valuation of $49.33 using a Return on Total Capital of 21.46%. (ROTC is defined as Net Income + Long Term Debt. This model also factors inflation and Corp. Bond Rates.)

Of course the key factor is future growth. I believe the box makers will consolidate eventually leaving a Big 3 (read: automobiles). Who will they be: CPQ DELL IBM/HWP/GTW??? Who knows? Certainly DELL & CPQ. I believe Eckhard will use this to motivate his troops. CPQ will be okay. Any kind of growth leaves this stock still undervalued long term.

TA shows extreme oversold conditions. Short term I believe there will be a small bounce and then some progress in the quiet period and finally relief at earnings. Mikey (Dell) is smart to stay in his niche. Eckhard has big ideas and an ego to match but the guy is smart and very motivated. He will lead.

Has anyone received those slick little retail brochures from DELL? Makes me want to pull out the plastic and order one of those neat 333 Mhz hotrods!
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