share price is function of growth rate, interest rates, sensitivity to cycles
if PE equaled growth, then Campbells Soup, Gillette, Coke, etc would trade at 1/4 current price... each has 5-15% sales growth... most astonishing to me is Lucent with 14% growth and 100PE
lower climate of interest rates dictates an exponentially growing multiple to earnings, NOT LINEAR, using same mathematics as bond principal values... yesterday's prevailing higher rates tested the limits with PE's in 12-17 range, supported by book value... rates back in 1960's were a different era... baby boomers have changed the landscape altogether with mutual funds, estate trusts, personal IRA's, pension funds, and fat savings
today's prevailing rates seem to be linked with PE's of 25-35 for non-anemic sales growth in 10-15% range... when growth exceeding 40% such as theQ, a PE well above 30-40 is certainly justified
finally, wireless is not a cyclic dust-covered business tied at the hip to the ravaging cycles (like cars, steel, basic metals, disk drives, memory, chemicals)... the nimble techs move quickly, and are not in this sorry class
/ jim |
