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Technology Stocks : Novell (NOVL) dirt cheap, good buy?
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To: Spartex who wrote (22443)6/5/1998 7:43:00 PM
From: Reginald Middleton  Read Replies (1) of 42771
 
<I feel Preferred Capital was way off to begin with, and I doubt the large institutions have put faith in their numbers. I'm looking more for 6-7 cents next quarter, and 8-9 cents in the 4th Quarter. So at this point, their 3rd Quarter numbers still looks too rich to me. Even with their revised numbers, Preferred Capital has 1998 annual earnings estimates at 30 cents for Novell, while I believe First Call has them at 22 cents.>

I have always had serious probelms with the accuracy of earnings as a proxy for shareholder value. I compared the correlation of about 4,400 companies' earnings to market value over the last ten years and found it to be very low. Depending on the industry, various cash flow measures track market value MUCH more cloesly. In the case of NOVL, the correlation is less than 50% over the last few quarters. Notice how inaccurate the First Call and I/B/E/S estimates were as you look at the results here rcmfinancial.com or here rcmfinancial.com for an example.
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