Trader J's Inner Circle Message Board

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Strategies & Market Trends : Trader J's Inner Circle

NVDA 182.91

-2.1%

1:44 PM EST

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To: pebbea who wrote (3122)	1/6/1999 4:08:00 AM
From: pebbea	Read Replies (1) of 56535

All: (S) MMCN Thoughts on P/E Research alerts Since 10/19/98: MMCN's price-earnings (P/E) ratio of 72.40 has been at least 25% below its industry's average. What does this mean? Alert Message This company's price-earnings (P/E) ratio of PE has been at least 25% below its industry's average. Alert Description By themselves, many measures of a company's or a stock's performance aren't very helpful. Benchmarks -- such as how performance stacks up against other companies or stocks in the same industry -- provide a lot of the needed perspective. Investors who specialize in undervalued stocks take particular note when a company's P/E ratio falls significantly below the average for its industry. That happens when the company's stock price falls disproportionately to its profits, or its profits rise disproportionately to its stock price. Either way, the ratio suggests that this is a firm whose stock has room to move up in price. Whether it will, of course, depends on many other factors. A disproportionate drop in the price of the stock, for example, may mean that analysts have lost confidence in the company's ability to maintain its current level of profitability. But a P/E ratio below the industry average might also mean that the market hasn't yet caught up to a buying opportunity. If you own this stock, or are thinking of buying it, you may want to reassess the situation. Among the possible next steps: -- How does the company stack up to the rest of its industry by other common measures of value? Compare its price-to-sales, price-to-book and price-to-cash-flow ratios with the rest of its industry. Do these ratios confirm that it may be undervalued? -- How about the company's sales and earnings growth rates? If a company's earnings growth rate exceeds its P/E multiple, many investors consider that another sign of an undervalued stock. -- What are analyst expectations for the company going forward? Perhaps they see a sharp drop in the company's earnings growth rate compared with its recent track record. That may justify the below-average P/E ratio. Let's take a look at these... The current P/E of MMCN is 72.40

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