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.

Technology Stocks : Advanced Micro Devices - Moderated (AMD) -- Ignore unavailable to you. Want to Upgrade?

To: Petz who wrote (56278)	9/25/2001 11:36:12 AM
From: chomolungma	Respond to of 275872

My rule of thumb is that for a company with good expectations of a return to black ink, the Price to Sales ratio should be between 1 and 3, depending on the growth prospects. John, You are right that you should use price to sales when we are at the bottom of a cycle. You are also right that growth prospects determines what PSR you are willing to pay. If I might add one variable to the mix - profit margins. If you can expect that a company will average 5% margins over a cycle, I would only pay 1 times sales. This equates to about a 20 P/E. If you can expect margins in the 15% range, then I triple that. Again, then you must factor in future growth prospects.