Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Gorilla and King Portfolio Candidates -- Ignore unavailable to you. Want to Upgrade?

To: surpow who wrote (22598)	4/12/2000 8:19:00 PM
From: Mike Buckley	Read Replies (2) \| Respond to of 54805

CHECK POINT I remember a few people have mentioned Check Point Software as a potential company to keep an eye on. Consider the following quote about their VPN security software from today's Fool write-up: "VPN-1 enjoys over 50% market share in high-end VPN appliances, three times more than its next competitor, and its lead is growing. That market is expected to expand about 300% this year, according to Infonetics Research. Frost & Sullivan predicts that IP-based VPN services will boost revenues from $1 billion currently to $13.59 billion in 2004. Check Point increased its VPN subscriptions 24% just this quarter, from 34,000 to 42,000." I smell a tornado for a Gorilla that dominates its market, a company with 45% profit margins, a stock price that is down 43% from its recent high, and a management team that beat consensus estimates five quarters in a row. For the rest of that Fool piece, check out fool.com Chaz, tell me someone is working on Check Point as a Hunt project. :) --Mike Buckley

To: surpow who wrote (22598)	4/12/2000 8:27:00 PM
From: Mike Buckley	Respond to of 54805

Noah, Funny, when the stock was going up for me last year my lack of understanding of valuations was a lot easier for me to ignore than it is now. Sadly, you're not alone. Could you please help me calculate a current P/E for QCOM? I know that the formula is Price/Earnings, but am confused at my answer of 125(price) / .24(Earnings) = 520. Your calculation is correct. I don't know where you got an EPS of only $0.24. Even if you include the one-time charges (which is a very impractical view of EPS), my data source at WSRN shows EPS as $0.44. Using that information, the trailing PE is 284. However, ... To ascertain EPS excluding one-time charges for items such as acquisitions go to quicken.excite.com You'll see that EPS excluding those items is actually $0.77. Your computation now reads as follows: Price $125 / EPS $0.77 = Trailing PE 162. Hope this helps. --Mike Buckley

To: surpow who wrote (22598)	4/12/2000 8:56:00 PM
From: John Stichnoth	Read Replies (2) \| Respond to of 54805

To expand on Mike's points: Few analysts today look at trailing earnings as an indicator of a stock's value. At the very least they look at forward 12 month earnings. The consensus on QCOM's earnings for the year ended 9/2000 is $1.07. For 9/2001 it is $1.39. This would give forward P/E's of 117 and 84, respectively. (The multiple shrinks fast as you go out in the future with fast growers). Additionally, it is reasonable to look ahead further--as long as you can be reasonably certain that earnings estimates will bear some semblance of similarity to reality. In QCOM's case, it is very easy to believe the analysts' estimates of 35% compounded annual earnings growth over the next 5 years. (In fact, many around here believe the analysts are still low). If you believe the 35% number that would give a forward 5 year earnings number of $4.67--and a 5 year forward P/E of just 27. It is the confidence that higher earnings will be realized further in the future that allows gorillas to be priced at higher multiples than non-gorillas. Hope this isn't beating a dead horse with answers to a question you didn't want to ask. Best, John