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Technology Stocks : Novell (NOVL) dirt cheap, good buy?
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To: E_K_S who wrote (7314)1/28/1997 11:13:00 PM
From: Salah Mohamed   of 42771
 
Hi EKS...About Price/Sales Ratio

>>P.S. It might be useful to compare other similiar companies Price to Sales numbers so we (Novell investors) understand how undervalued this stock really is. Other software companies include CA, MSFT, BORL, Orcle, IFMX and many others. Please post and we can review the differences in each company.<<

I made a comparison between NOVL and MSFT based on the latest two quarters. Novell Price/Sales Ratio is 2.54, while MSFT ratio is 12.45. Here are the numbers:

----------------------
Novell
Q3-96 = 365M
Q4-96 = 384M
6 Months Revenues = 365 + 384 = 749M
Annual Revenues = 749 x 2 = 1498M
Shares = 346M
Stock Price = $11
Market Cap. = 346 x 11 = 3806M
Price/Sales = 3806/1498 = 2.54

Microsoft
Q1-97 = 2295M
Q2-97 = 2680M
6 Month Revenues = 2295 + 2680 = 4975M
Annual Revenues = 4975 x 2 = 9950M
Shares = 1304M
Stock Price = $95
Market Cap. = 1304 x 95 = 123880M
Price/sales = 123880/9950 = 12.45
----------------------

Note that the market cap. of MSFT is 32.5 times that of Novell (123880/3806). Isn't this ridiculous?. The main reason for the huge difference in valution is that MSFT has consistently grew both revenues and earnigs at 25%-30% annually, while NOVL is stumbling. Further, MSFT operating margins (38%-40%) are about twice those of Novell (18%-20%).

Regards

Salah
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