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.

Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gregory Rasp who wrote (35279)	5/19/2000 1:33:00 PM
From: scott_jiminez	Read Replies (1) \| Respond to of 70976

Gregory (mostly OT) - your rationale and analogy are appropriate and I agree with the conclusion. But you must have anticipated the logical response: if I may interpret a bit, your argument essentially boils down to total confidence in efficient markets. That is, a market leader has a higher PE because it is growing faster. However, if the word 'perceived' enters the equation then things change. For instance, in the case of Klic, FirstCall shows earnings estimates producing a growth rate on the order of 50% per year for the next 2-3 years. Even if the sector sees a downturn subsequent to that, its hard to figure out why analysts would give the company a (5 year) LTGR of 18%. Perhaps the company is 'perceived' to be ONLY in the bonder business (which is clearly no longer the case) and therefore given a very modest growth rate (and I'm not even sure of the rationale for THAT). There's a strong likelihood that if the reported estimated LTGR were more in line with the analyst's earnings estimates (~25-30%) the stock would be given a valuation commensurate with the rest of the sector (and I'm sure that sounds to you as lame as any other shareholder of XYZ company claiming their stock is undervalued). If valuation discrepancies were always justified, then it would be EXTREMELY rare for one company to outperform another within a sector. In fact Klic significantly outperformed the sector (including AMAT) from September, 1999 through March, 2000. The stock is now getting trashed worse than the sector even though it's earnings surprise for Q2 was +20%. And the CEO stated the outlook for the foreseeable future was better than ever. Go figure. (actually, it was just reported that Fidelity saw Klic's valuation and just decided to back up the truck insidertrader.com