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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Kirk © who wrote (1650)	1/15/2002 10:36:58 AM
From: Cary Salsberg	Read Replies (2) \| Respond to of 95581

RE: MXIM P/S MXIM has achieved after tax profits of 35-40% of sales. A P/S of 12 is a PE of 30 when profits are 40% of sales.

To: Kirk © who wrote (1650)	1/15/2002 11:11:20 AM
From: Crossy	Read Replies (1) \| Respond to of 95581

Kirk, see I didn't do an explicit DCF. I hate to do them because it is a good deal of judgement involved and what you get from a DCF is not necessarily better than an analysis involving a couple of simple financial ratios. I used the link to DCF because it is usually a starting point for the PE ratio also (sort of an implicit treatement that is an "input" to a ratio) You are of course right in a theoretical sense with the treatement of cash as an annuity as you suggest it. 15% for "cost of capital" ? I'd use long bonds in your risk class. The preference for ZERO debt in tech companies stems from the imperfection of capital markets (lieu of CAPM models). In order to preserve degrees of freedom for management (just look what happened to LU) or to withstand adverse cycles zero debt is a preference to consider but it is not a requirement. Actually if I see a company starting to get rid of debt or to profit from refinancing opportunities in falling markets I tend to like the situation <g>. Can provide "unexpected" jumps in EPS to the general public.. rgrds CROSSY