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Technology Stocks : All About Sun Microsystems
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To: Dale J. who wrote (12574)12/13/1998 4:20:00 AM
From: Charles Tutt  Read Replies (1) of 64865
 
I don't know where you get a PE of 40. There are lots of ways to calculate PE, but taking the last 4 quarters (.57+.59+.73+.50=2.39) yields a PE of about 32.4 at Friday's closing price of 77 3/8, and taking projected earnings of 2.70 for the fiscal year we're in (Value Line's projection) gives a PE of about 28.7. A PE of 40 implies earnings of about 1.93, and I haven't heard your justification for such a steep decline. Of course, if the stock DID suddenly "double or maybe even triple" without any increase in earnings, the PE would be higher ...

Perhaps you're not taking out the charges associated with acquisitions; I think most people agree that would not be an appropriate way to calculate PE.

I also don't agree with your 13% figure for growth rate. Again there are lots of ways to calculate this, but Value Line gives a "Past 5 years" growth rate of 19.5% for sales and 34% for earnings. Continuing to use VL numbers, Yr/Yr growth rates for the recently reported September quarter are more like 22% on earnings (.50 vs. .41) and 19% on sales (2491 vs. 2098). This despite problems in Asia.

I do, however, agree that Sun is a great company. <g>

Let us know how you're doing _your_ calculations if you want to make an "intelligent" post.

JMHO, as always, and not intended as investment advice -- do your own research and make your own decisions.
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