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

To: FR1 who wrote (36267)	8/4/2000 2:53:40 PM
From: w0z	Respond to of 70976

Franz, scroll down to the bottom of this page and click on "EPS Est." There you will see under "Estimated EPS" the number $3.42 for FY 2001. This is the "consensus" or average of all the analysts covering AMAT (only one of whom is SSBaloney). At the bottom of the same page you will see the consensus "Expected EPS Growth" of 25% which agrees exactly with the SSB multiple. Why?...most analysts assign a Price/Earnings multiple based on the long-term growth rate...hence 25% yields a P/E of 25. OK? BTW, the ratio of P/E to Growth in this case is assumed to be 1.0 which you will sometimes see called the PEG ratio (P/E to Growth). Stocks trading below this number are typically considered undervalued and those trading above are considered overvalued.

To: FR1 who wrote (36267)	8/4/2000 2:56:24 PM
From: Sun Tzu	Respond to of 70976

Essentailly what they are saying is that in their opinion, AMAT will be earning $3.83 in the calendar year 2001. And that again in their opinion, a PE of 25 is fair value for AMAT. Therefore the price target for AMAT must equal $95=3.83x25). How do they know AMAT will earn $3.83? One part company guidance, two parts top-down analyst forecast, three parts peer comparison, all fed through a random number generator a.k.a bottom up analyst. Why do they think 25x is a fair price? A similar process as above, only replace company guidance with historical multiples. hope this helps, ST PS Did they change their earnings forecast or only their multiple?