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To: Oeconomicus who wrote (2928)	6/5/2003 10:26:59 AM
From: w0z	Respond to of 4345

"Anyway, the bottom line about all these ratios is that any one of them can mislead you at times, so you should look at a combination of them and, more importantly, don't stop there - try to understand the company behind them and whether there is a good reason for them to be at the levels they are." Amen, amen, amen...worth repeating in bold!

To: Oeconomicus who wrote (2928)	6/5/2003 11:35:17 AM
From: Dave B	Read Replies (2) \| Respond to of 4345

Bob, The discussion was about using P/S to value a company. You are correct in that neither of the books I mentioned spend a lot of time on P/E either, but Brealey and Myers has a section (4-4) specifically titled "The Link Between Stock Price and Earnings Per Share". There is no discussion of the link between stock price and the P/S ratio. Skimming a little further ahead in the Fisher article, he appears to claim (and I'm probably oversimplifying this based on having read a grand total of two or three paragraphs of his writings <g>) that low P/S companies can improve their Earnings position significantly with only a small improvement in margin. So if you have faith that management can make the changes necessary to improve the margin (I would assume under some change in conditions that has produced the lower margins to begin with), then the expectation of increased earnings goes up quickly. And increased earnings expectations lead to increased stock prices. My apologies if I've mis-stated his rationale, and I'll be looking further into the Fisher materials to understand them better. Ultimately, I can't imagine anyone would argue with your final paragraph about using a combination of factors to evaluate a company, and especially the fundamentals behind it (which leads back to the statement above about having faith that management can improve the margin position). If there was a single factor everyone could use, then we'd all be billionaires. As an aside, I couldn't tell you the PE or PS rations of the companies I tend to invest in -- I tend to look at more fundamental factors. Now, I'll bow to the wisdom of my elders <ggg>, and head off to pack for a bit. Have a great weekend everyone. Dave