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Technology Stocks : TAVA Technologies (TAVA-NASDAQ)
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To: James Strauss who wrote (12438)3/10/1998 6:29:00 PM
From: Norman Stone  Read Replies (1) of 31646
 
James,

Your ebullience is admirable in its own right, but I can't agree with your P/E projections. Let's do the math.

Start with a three-year time frame. Over three years, with moderate risk, what return should I expect? Let's say I hope to triple my money. I can double it in blue chips.

A P/E of 100 predicts at least a ten-fold increase in earnings over those three years. A ten-fold increase would result in tripling the stock's price while settling into a P/E of 30.

It's that simple. really. If in three years Tava will be at ten to fifteen times current earnings (yielding a P/E of 20 to 30 at that time), a current P/E of 100 is justified. It's only the "will" that gives us pause. Can you project earnings in three years that equal the stock price today?
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