America On-Line (AOL) Message Board

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Technology Stocks : America On-Line (AOL)

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To: Vendit™ who wrote (10181)	4/11/1999 9:56:00 AM
From: RocketMan	Read Replies (1) of 41369

Is AOL 40% cheaper than the market?? Here is an interesting quote from Worth magazine I found on the Yahoo thread: interesting staement in Worth..... by: bobtmay (35/M/MA) But is it too late to buy these stocks? Maybe not, although it's tempting to conclude as much after a glance at the price-to-earnings ratios of these stocks. For example, at a recent price of $159, AOL was trading at 167 times next year's anticipated earnings of $0.95 per share. Ridiculous under any circumstances, but especially so considering that the stocks in the Standard & Poor's 500 Stock Index are trading at 23 times next year's earnings. Yet a strong case can be made that AOL is actually cheaper than the market as a whole. (Warning: number crunching ahead.) To see how that could be, investors need to factor in the anticipated earnings growth rate of both AOL and the overall market. The consensus among analysts is that AOL's earnings will grow 47 percent next year, versus a paltry 3.8 percent for the S&P 500. The ratio of AOL's current p/e to its anticipated growth (its "PEG ratio") is 3.5. The market's PEG ratio: 6. Conclusion: AOL is more than 40 percent cheaper than the market. Here is the entire article: worth.com

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