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Strategies & Market Trends : JAPAN-Nikkei-Time to go back up? -- Ignore unavailable to you. Want to Upgrade?

To: borb who wrote (2283)	3/24/2000 1:50:00 PM
From: Professor Dotcomm	Read Replies (1) \| Respond to of 3902

Yes, Borb. Good one. In my opinion a p/e cannot be used in isolation. It has to be correlated with the company's internal growth rate. Cisco's 300 times does not mean that it is being valued at 300 times earnings - unless the company's growth rate is nil. If the company's growth rate is 100% for each of the next five years, the p/e would be about 18 times. In other words we have to calculate how many years of constant growth the company needs to reach a tolerable p/e that we are comfortable with. That is why the estimated slope of the growth gradient is almost essential for these Internet stocks.