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Technology Stocks : TLAB info?
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To: Vted who wrote (2797)7/27/1998 12:58:00 PM
From: Chuzzlewit  Read Replies (1) of 7342
 
You are obviously using PEG to decide on stock valuations. This method is flawed because it fails to take into account such niceties as long-term interest rates and the perceived riskiness of growth. In addition, the assumed long-term growth rate is quite iffy.

To obviate this problem I have come up with a variant of PEG called CNPEG (Chuzzlewit's Normalized PEG) which obviates the long-term interest rate problem by normalizing the result relative to the S&P 500. All you need to do is to calculate the PEG value of the S&P 500 and divide the PEG for TLAB by this number. The PEG for the S&P was around 3 when I last checked it (about a month ago).

Let's assume that the growth rate of TLAB is 35%, and that it is trading at a P/E of 49. That would yield a PEG of 1.4. But normalizing using the S&P PEG of 3.0 yields a CNPEG of 0.47. Thus, relative to the market growth is cheaper with TLAB. In other words, TLAB would be a buy.

TTFN,
CTC
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