I know that "HOT" stocks don't trade based on their fundamentals, but I thought to do some FA anyway. I used *very* generous growth rates that are beyond anything the street is estimating to compare SIEB, AMTD, and EGRP. When looking at super hot stocks, the best way to values them is on the basis of their Price-to-Sales ratio. If you want to be very generous, you extrapolate the sales growth rate and figure out what the forward sales are going to be, and then you use that number for the comparison. But if you are really brave (or insane) you assume that the bull market will continue for another two years and that the companies will be able to grow at the same hyper growth rate and use these "two-year" numbers for your analysis. So let's see where this leads us:
AMTD _MC=7B_, _99rev=320M_, _00rev=410M_, _99P/S=22_, _00P/S=17
EGRP _MC=11B_, _99rev=586M_, _00rev=873M_, _99P/S=19_, _00P/S=12.6
SIEB _MC=740M_, _99rev=32.5M_, _00rev=36.5M_, _99P/S=23_, _00P/S=20
In contrast, Merrill Lynch has PS=1 and PE=32 (and is still considered expensive). Anyway, you can compare my numbers to those of Wall St. and see how much more generous I've been. The point being, that even with such generous assumptions, these guys are still an order of magnitude more expensive than the likes of MER and DLJ, *even* if they can continue to grow like this till 2001. What will happen in 2001? I am guessing that by then either the bull market has come to an end, or other big brokerages have realized how good online trading is and have saturated the market. don't get me wrong, I am not saying that they will be eating the current OLBs' lunch; Quite the opposite, I am saying that the OLB model will prove so successful that it will saturate the market by then and there will be no more hyper-growth after that. Which means, you could expect a 80% crash in these stocks between now and then.
So remember, these are trading stocks; don't get attached to them.
Sun Tzu
P.S. Earnings will be out in early May. |
