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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (53117)	5/18/2001 7:32:51 AM
From: GVTucker	Respond to of 77400

Jacob, RE: Before the bubble, they said the appropriate PE was equal to (not up to 50% higher) than the growth rate. Nah. The key is how dependable the growth rate is. If a company can grow dependably at 20% per annum (no small feat, for sure), then it's proper PE would certainly be above 20, otherwise the expected return on the stock would be 20%, which is probably too high. (Of course, when I talk about expected returns of 20%, then you're getting back to bubble-ology.) Buying a stock at 1x its growth rate has been a decent rule of thumb for a while, and rightly so. But note that you want to buy a stock when it's cheap, not when it's fairly valued.