How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 497.36

-1.9%

Nov 6 3:59 PM EST

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To: Reginald Middleton who wrote (9633)	7/25/1998 8:29:00 AM
From: Moominoid	Read Replies (2) of 74651

Lets assume that a year ago or so MSFT was not overvalued when it traded at a P/E of 50 or so. At that point in time earnings were increasing at about 30% p.a. or more. Currently the forward projection is 20% or so but MSFT trades at a P/E of 66. Using the very simplistic PEG formula it should now have a P/E of 33 if it previously traded at fair value. If the previous price was fair you'd have to show that the growth rate of economic value added by capital (that's your earnings measure ?) was accelerating rather than declining to explain the current price. Am I going wrong somewhere here? David (short MSFT - for the moment)

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