3Com's PE is not 30. That is misleading because it is based on trailing 12 months earnings. Seeing how 3com has not reported 3rd quarter earnings yet (last year reported 2 cents, this year it will be 23 cents)their real PE is something more on the lines of 24. But even that doesn't tell the full story because last years 4th quarter was 17 cents, this year it will be 27-30 cents. In reality, the true PE is about 18. Also, seeing how they are currently in their 4th quarter, they should soon be trading on fiscal year 2000 earnings.
As far as future growth, they will have to rely less on the analog modem business as the cable modem market is ramping up quickly. Also, they will have the higher margin businesses of Storage Area Network(SAN), IP telephony, layer 3 switching, and new products that will derive from the Siemens alliance for the carrier-class market.
So yes, I believe, 3Com is a great buy at this level with very limited downside. It will be back in the 50's by this time next year. |
