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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: Jack Jagernauth who wrote (8057)	8/3/1999 8:08:00 AM
From: JZGalt	Read Replies (2) \| Respond to of 18928

Jack, It seems like I've managed to convert someone over to my methodology of "valuation" where 5 year estimate of growth multiplied times an eps share number allows you to calculate a "fair value". In Larry's calculation this is just: 25.5 X $0.66 = $16.83 I tend to look at next years 12 months eps and come away with $0.80 over next 12 months (expect higher revisions) and a fair value of $20.40. If I am correct, then I am in no hurry to sell AMKR. ---- Dave

To: Jack Jagernauth who wrote (8057)	8/3/1999 6:03:00 PM
From: Larry Grzemkowski	Respond to of 18928

Jack that's a good question. First of all I must say that these ideas on setting fair value, cheap and overvalue came from JZGALT whom I believe has some very good thought patterns and has work in progress that I believe is meaningful. So how about fair value for AMKR. Well from YAHOO I get this years earnings of $0.66 which is the conservative number because you could make a case to use next years higher number. Now YAHOO also tells me that the consensus 5 year earnings growth rate is 25.5%. So what you do is take 0.66 x 25.5 = $16.83 and that is fair value. Now Dave offered that to me but never explained why it was so. But I like you questioned it so this is what I came up with. First of all what is fair value for these growth stocks. A good measure could be the PEG ratio which is the ratio of the PE to the EARNINGS GROWTH. So if your stock has a PE of 100 but has earnings growth of 100% then the PEG ratio is one and therefore the present price is fair value. So for AMKR when the stock is at fair value PE = EARNINGS GROWTH RATE so 25.5% earnings growth rate = PE of 25.5, and PE x Earnings = Fair value Price (when PEG =1). So that's how I came up with a fair value of 16.83. Hope that helps. Larry G