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Technology Stocks : Internet Analysis - Discussion

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To: Chuzzlewit who wrote (69)	2/2/1999 6:39:00 PM
From: Joe E.	Read Replies (1) of 419

Chuzzlewit: "So when you evaluate the method in terms of PV of cash flows I think you are making two unwarranted assumptions: first, that you know the risk-free discount rate the market is applying, and second, that you know the risk premium. " I was actually just trying to point out that while the YPEG ratios are a good equalizer for most growth companies (up to 35% growers, at least), they don't work that well for hypergrowth companies where the hypergrowth is expected to continue for some time. High growth companies should have higher YPEG ratios, just based upon the compounding effects of the high growth rates. I was trying to give an example, but it certainly got involved, perhaps obscuring the point I was trying to make. "The biggest problem I have with my metrics (and I'm not sure how to handle this easily) is that there are some stocks in the S&P that don't have earnings, or whose earnings are minimal. Nevertheless, these companies have "value" based on their assets. Perhaps these need to be excluded because they provide an inflated forward P/E." Isn't the S+P driven mostly by the 10-15 biggies, all of which have earnings?? I don't see this as a problem, myself.

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