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Technology Stocks : Dell Technologies Inc.
DELL 126.42+2.8%Dec 19 9:30 AM EST
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To: The Phoenix who wrote (64722)9/10/1998 2:12:00 PM
From: Chuzzlewit  Read Replies (1) of 176387
 
Gary, think about what you are saying. If you had a CD that yields 5% for one year, then your method would say that the instrument actually yielded 4.76% at the end of the year. What you really mean to be saying is that your worth was 4.76% less last year than it is now. The problem with your point is that if you expect 5% growth in the next period it makes no sense at the end of the period to then say that you actually experienced 4.76% growth in the previous period. If actual growth exactly equaled expected growth the two numbers should be identical.

This is a matter of convention and definition. If you did $1 billion this period and $800 million last period, then your growth rate (by convention!!!) is 25%. It is fair to say that your sales were 20% lower in the previous period, but growth rates are by convention forward looking. I challenge you to show me one company or instance in which growth is calculated as you propose.

What's interesting here is that this discussion precisely underscores the problems with trailing P/Es. They use the wrong denominator. That's why I prefer to use forward-looking P/Es. Of course, this is a problem in comparing a stock (price) to uncertain flows (earnings).

TTFN,
CTC
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