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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Andreas who wrote (87963)	12/15/2000 8:46:58 AM
From: profile_14	Respond to of 97611

I think the better analogy is that CPQ is trading at 0.75x sales, versus IBM's 1.3x sales and Dells 1.7x sales. Compaq is justifiably at a discount since it is in a recovery mode, but this latest downturn is not Compaq specific. As the firm recovers, so will the premium that is placed on its equity, IMO. It will not be quick either, and I would not expect it to occur until the latter part of next year. Until then, keep writing those calls.

To: Andreas who wrote (87963)	12/15/2000 9:31:53 AM
From: MeDroogies	Read Replies (3) \| Respond to of 97611

That's a question I asked earlier on the thread, and somebody replied $15.... I don't know how they came up with that number. I suppose that it was simply the value of assets, which...based on what little info I've researched at this point...seems right. You're referring to book value, of course, which makes sense. I don't usually look at that because the nature of what I do means I have to take a hard look at the numbers here. The finance guys tend to focus more on 2 things - what are the value of assets, what is the cash flow. Debt is something that, when you've got it, tends to be something that you deal with on a separate basis...it's like something you're always going to have (unless you get rid of it, like my last company's strategy - one I prefer). CPQ is running at a very low price to cash flow ratio. Even at book value, the actual price you'd purchase CPQ for is low. If you figure that the stock is really worth $11 (less the overall value of assets and debt), that's an awfully low cost to buy a firm that is generating over $1 in earnings per year. I did a quick comparison to Dell and it's apparent that CPQ is quite a value compared to Dell....either that, or Dell is wildly overpriced. Dell has a book value of less than $3, has cash flow of about 1/2 CPQ, and earnings that are .10 per share less.............. Sounds like the real problem with CPQ is that WS just doesn't feel their management is hip or cutting edge. Still, the numbers would seem to indicate that regardless, they do perform at a very high level. One area Dell bests CPQ is return on equity. But that's typical when comparing relatively small companies to their monstrous brethren.