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Technology Stocks : How high will Microsoft fly? -- Ignore unavailable to you. Want to Upgrade?

To: limtex who wrote (25001)	6/26/1999 12:34:00 AM
From: Lin	Respond to of 74651

Let's do the Math. In 8 year, you recoup your $430B and the revenue is 8X what it is today. You sold it at a 50% discount to what you pay for, that is 430X8*0.5= $1720B. In all, you make 4X net profit in 8 year on the initial $430B. Not a bad investment, IMHO. It is all how you spin the story. In reality, either case is probably not going to stand. Desclosure, long MSFT.

To: limtex who wrote (25001)	6/26/1999 9:34:00 AM
From: PMS Witch	Read Replies (2) \| Respond to of 74651

Let's say Microsoft's PE is 67. Let's assume Microsoft earnings grow at 30% per year. Conventional thinking says this stock is priced at more than double its value. If one buys a share today, at $85, they would get $1.30 in earnings, (My estimate) this year, and $1.301.3 next year and $1.301.3^n for future years. Using a 'safe' investment, such as treasury paper at 6% as a base, one must discount these future earnings to today's value. One is left asking the question "How long does it take for me to get my money back?", or, more appropriately, "Which stocks give me my money back the quickest?" Remember, we're dealing with equivalent purchasing power and not dollar amounts. We're now looking at a formula: $1.31.3^n = $851.06^n We must solve for n using the numbers for various stocks if we wish to assess Microsoft's investment potential relative to other stocks. By the way, in my example n works out to 20 years, 6 months. Let's use Cisco Systems Earnings $0.70 Price $60 Growth 40% $0.71.4^n = $601.06^n We get n coming out to 16 years. By the way, I wrote a program to do this for several stocks a few years ago. At that time the longest period worked out to 8 years, with 5 years being the quickest. (CSCO) Conclusion: Yes, stock are NOT cheap. But then again, few things worth having are cheap. Cheers, PW. P.S. I'll be away for a few days. Whenever I leave, the market does quite well. P.P.S. I'm using published earnings and not taking into consideration the 'reserved' revenues. One must have a consistent base for comparisons or their efforts will be wasted. Disclaimer: This post is NOT meant as an analysis of Microsoft, or Cisco as an investment, but only as a guide to a starting point on an approach each investor could adopt in deciding for themselves if a stock is appropriate for their portfolio. (long or short) Much more sophisticated and detailed analysis is available on-line if anyone wants to test this type of investment selection.

To: limtex who wrote (25001)	6/26/1999 1:08:00 PM
From: Jim Lamb	Respond to of 74651

Here is the way I calculate the math on your post. In 8 years if stock price of Microsoft does what it has in the last 8 years I'll be able to buy one,maybe two of the smaller states. I will declare myself emperor and rule my domain for 10,000 years. Thanks for the post. I gave up trying to rationalize stock prices based on P.E long ago. I would rather read post's like T2000 posted earlier this week. Message 10264212 and just buy and hold.