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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Don Westermeyer who wrote (28488)8/27/1998 7:46:00 PM
From: Gameboy  Read Replies (2) of 95453
 
The PER of a stock is a factor of the interest rate and forward looking earnings. If the interest rate were 20%, the equivalent PER (of forward looking earnings) would be 5, because an investment in either a bond or a stock would yield the same return. If the interest rate were 10%, the equivalent PER would be 10, and so on.

Today, the return on 30 year US Treasury Bonds hit 5.34%, the lowest level since the government began regular sales in 1977. This means, the equivalent PER of stocks would be 18.73 - so that both stocks and bonds would yield the same return.

If you take the worst case earnings estimate of your oil service sector stock for the next 12 months and multiply it times 18.73 you would have the equivalent 'value' of your stock compared to an investment in a bond. If you get a number about 2 or 3 or 4 times greater than the current value of your stock, you've got a heck of a deal.

Makes you wish you could buy every single share in the company, doesn't it?

Best of luck,

Steve
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