<<< the only Criteria should be if each quarter is a certain percentage better than the last whatever your parameters are in that regard >>>
That is true. But to attain a high PE, that percentage must be extendable well out into the future with reliability. That is the way a valuation model for a growth stock works. Once that reliability is gone, the PE goes with it.
WCW, instead of yielding a lucrative stream of earnings for the foreseeable future, a base on which to build future earnings, will now die an unnatural death (just as the stock appears to be doing now). That base will soon be gone. The old reliability (or at least the perception of it) is gone. So is the old PE.
WCW may account for 75% of this quarter's earnings! These earnings will be fantastic, but analysts will be badgering Farrell about the WCW percentage. It's lose-lose. If he breaks out this percentage, it will look bad. If he doesn't, it will create more uncertainty.
Here today, gone in a year. Wall Street pretends to look out a long way (it doesn't, but it pretends), and it hates uncertainty. What is certain is WCW revs will stop in 15 months or so. What is uncertain is how good Quest, RugRats, ... will be (they look good, but who can say?). Furthermore, even if these are smash hits, might it be the case that THQ loses these licenses too?
THQ is suddenly looking riskier. High risk = low PE.
Wade |
