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Technology Stocks : Dell Technologies Inc.

DELL 133.78

-0.1%

Nov 14 9:30 AM EST

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To: BBG who wrote (89700)	1/18/1999 12:32:00 PM
From: Chuzzlewit	Read Replies (1) of 176387

BBG, I prefer not to think in terms of P/E, but rather in terms of earnings yield. Using this way of looking at things I consider probable future earnings as a percent of current share price. When you think of it in these terms, it really comes down to a pay me now or pay me later decision. Those who invest in high growth stocks are betting that future earnings will grow at a rate sufficient to justify a lower current earnings yield. So, the converse of this is that earnings yield must increase as expectations of future growth decreases. But earnings yield is also influenced by several other factors. For example, the less risky the forecasts for future earnings growth seem, the lower the required yield. Another factor is prevailing interest rates. Lower interest rates tend to lower required earnings yield. Remember, lowering the earnings yield implies an increase in the price of the stock relative to next year's earnings. But if you are a die-hard, and insist on using price to earnings ratios, at least use a forward looking ratio. And yes, decreased growth expectations will lower forward looking P/Es. TTFN, CTC

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