<All I'm asking is for you to explain your methodology.
Valuation models are only as good as the assumptions that underpin them.>
It appears to me that you are asking for a course in finance and DCF methodology, that I am not willing to give. The assumptions are right there in the anaylsis and on the spreadsheets. You say you don't understand them, but it seems to me that you are not trying hard enough (like when you could't find the P/E's because they were not labeled "PE" but multiple of earnigns, or you could have just overlooked them, but anyway you didn't see them and they wer right there).
>>remember that MSFT does not
>>have to grow their market cap at 40% per year, that is your job as the investor.
>I'm not asking Microsoft to do anything. All I'm saying is that to justfy my >paying 40 times earnings, in a company like Microsoft, I want to see 40 >percent earnings growth per year.
That being said, you cannot be invested in NSCP, or you will be looking for almost 400% earnings growth per year.
It seems as if you misunderstand the relationship between market cap and earnings. Market cap is a result of debt, and equity offerings, eanrings are what net money a company makes. Market cap does not really have anything to do with P/E, suppose MSFT has 20 billion dollars of bonds sitting out there. Both the bonds and the equtiy value are affected by investor sentiment, and not directly by earings. Therefore market cap can change without a change in earnings. On top of that, debt is not used to calculate P/E, but is used to calculate market cap. Focusing on mainly on P/E will, at times, lead you down the wrong path.Focusing on P/E purely as a function of marjet cap is dangerous. To be historically accurate, the larger cap high PE stocks have been the better long term performers, on average. And if you are strictly a P/E man, you have absolutely no business investing in NSCP. You are starting to show your lawyer side now.
<Netscape and Microsoft are not comparable in this regard. Netscape is a start up with 100 percent plus earnings growth per year. Microsoft is a much more mature company, at a totally different point in its coporate life span.>
This does not validate NSCP's P/E at all Gerry. Who have you been listening to? I have yet to hear a plausible argument from ANYONE (yes that's a challenge) that justifies NSCP's current valuation (approaching a 400 P/E). Microsoft's long term, perpetually increasing growth, justified its valuation up to now. One could relatively easily argue the 2 billion R&D investment (a industry record for internal investment without as much as a slight hit in cash flow or owner earnings), coupled with encroachment on new, higher margin territory as well as the avenues opened by the internet more than justifies MSFT's P/E (for close to 1/10th of NSCP's P/E (read PRICE) you are getting nearly 50 times the earnings for your money - and the absolute earnings potential for NSCP does not even eclipse that of MSFT. think about what you are paying for Gerry).
<Is NT ramping up as fast as Microsoft wants?>
In order for any of MSFT's prodcts to ramp up as fast as they want, all other competitors will have to go out of business. What kind of question is that? You tell me, how much do they want? The logical answer would be everything. The truthful answer will be unknown outside of MSFT, they will never release news of a true failure before its time for it shows weakness. What you are hyping on is the conservative culture of the companies interaction with the press. For instance Windows 95 not living up to expectations? Windows 95 was the biggest, most cash laden event in the software industry's history. Where are you coming from Gerry? |
