You said:
Ok, here is my twice yearly defense of the pe. The q was .38, right? So they will earn
.38, .41, .44, and .48 going forward. This is 1.71, which is a forward pe of 65, not
80-120. Revenues are growing at 40% plus. So csco is getting a slight premium to the
growth rate, while positioned as the leading company in their market presently, and their
market will not be saturated for many years.
If anyone thinks it is too high here, fine. Wait for the next brutal sell off. The price was
41 at the low in October, which was a pe of about 25 based on this quarters run rate.
Well said. And investors who are willing to take the risk / reward of companies trading at 60 - 70 PE with EPS growth of 25-30% should certainly be buying today. Also you have to agree that CSCO's forward PE of 65 is at the high end of its historical range.
The valuation is a function of a number of things. Dow is up about 20% , S&P about 12% and NAS about 17% for the year (and we are not half way there). Do you think you can extrapolate in a linear fashion. Sure CSCO will trade at 150 when NAS gets to 2800. With interest rates having gotten up so much so quickly, I just think the risk outweigh rewards (not just for CSCO) but most hogh PE growth stocks.
I typically use market sell-offs to buy quality companies at the middle of their PE range (I sell when it gets too far out of line). You can't catch the bottom , and you can't sell at the top - but you reduce your risk (and in some cases potential returns). But this process has served me well in tech investing.
Regards
Alok |
