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To: Herschel Rubin who wrote (52434)	5/7/2001 9:56:35 PM
From: Ibexx	Respond to of 77398

Rotomola on track to recover: Message 15768347 Ibexx

To: Herschel Rubin who wrote (52434)	5/7/2001 11:23:33 PM
From: Stock Farmer	Read Replies (1) \| Respond to of 77398

Herschel - good observation. But it may serve to point out that PEG is a goofy ratio more than EXTR is overvalued. Assume company A grows real economic returns at a steady rate of 30% from $0.10/share, as of today. In ten years its cumulative economic return is $1.84 in today dollars discounted at 15%. Assume company B grows real economic returns at a steady rate of 100%, also from $0.10/share. In ten years its cumulative economic return is $34.11, also in today dollars, also discounted at 15%. So one could argue that the stock would be worth 18x as much, not merely the 3.3 x that a "PEG" comparison would suggest. Now, when we run the math over 5 years, we see the ratio is 3.11 - quite different! And PEG:PEG comparisons are only off by about 7%. So in this case, PEG is a much better proxy. Finally, if you say to yourself, yes, but what about Joe Futuredude who will be buying this from me... and run the numbers for three years from today to six years from today, the ratio is 6x. So the immediate conclusion is that using PEG to compare stock prices is possible. But the comparative ratio that signals "fair" is not universally 1.0 John.