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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 74.47

+1.9%

Nov 3 3:59 PM EST

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To: ed who wrote (22794)	2/18/1999 10:15:00 AM
From: RetiredNow	Read Replies (4) of 77397

Well, I believe Cisco is overvalued for several reasons. It is at an extremely high PE relative to its historical PEs. It is at an extremely high PE relative to its growth rate. I still believe in valuing a company based on its fundamentals even though most people believe that Internet hype should supercede reasonable valuation methods. Now I do believe Cisco deserves a premium to its growth rate due to its earnings predictability and their almost perfect execution. So I believe a reasonable PE for Cisco is around 60, which would put the price around $80. I know I'll get flamed for saying that, but folks in the end all that matters is fundamentals. No amount of hype makes a company worth more than its underlying strength. Don't get me wrong, I own a ton of Cisco. But the reason I like it is because it is a steady performer. Recently, its price has been all out of whack just like the Internet stocks. So this cooling down is a blessing. It will allow us long termers to pick up more for the long haul.

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