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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Mary Cluney who wrote (41241)	12/1/1997 6:39:00 PM
From: James Howell	Respond to of 186894

Mary Cluney <Who determines PE? What is the formula?> Price/Earnings Ratio P/E Ratio = Market Price per share / Earnings per Share Hope this helps Jim

To: Mary Cluney who wrote (41241)	12/1/1997 7:00:00 PM
From: Carl Fritch	Respond to of 186894

Hi, I think I can help a little... the actual PE is a formula that is based on the earnings per share. see: fool.com Companies that have high PE's are companies that investors believe the earnings per share will "grow" to justify the higher PE at that price. If you buy a good company that continues to grow this strategy will work. If the companies earnings start to fall the PE and price will fall. WDC is a great example of a company that has a very low PE but investors are staying away from because of fear that their earnings will be lower in the future. There isn't any set way that I'm aware of to tell what a given companies PE should be other than what investors are willing to pay at any given time. Companies that are expected to continue to grow will have higher PE's and companies that are not expected to grow will have lower PE's. The best advise on pricing a PE that I've found is to use the industries PE and the historical PE for the company. If a company has a lower PE than other companies in the same industry and the PE is lower than it has been in the past then the company can be considered a good value. I recommend reading the information available at www.fool.com. I believe they have some of the best advice on the Web for investing. Good luck, Carl Fritch

To: Mary Cluney who wrote (41241)	12/1/1997 8:59:00 PM
From: 16yearcycle	Read Replies (1) \| Respond to of 186894

To the other responses here, let me add that a company's pe will be lower in an industry that is thought of as "capital intensive." With intc having to one day invest 10 billion dollars for a new fab, it is very capital intensive, although it has great margins. for example, which company is worth more? a) $5 eps. No reinvestment of those earnings needed to sustain the $5eps. b) $5 eps. Company has to reinvest $2 eps to sustain its market share, hold its competitive position, or grow its revenues enough to cancel out declining margins. If it continually reinvests high amounts of profits, it will stay at $5 eps or grow slightly. It is self evident that company a is worth more. In 5 years it would have retained a total of $25 eps, while company b will have retained 15 to keep eps the same. intc is like b. Wrigley is like a. Wrigley deserves the higher pe. Period. But then one offers that intc growth will be greater, it dominates its market, blah, blah, blah. Well, intc's market cap is much higher, by many times. The bottom line, imho, is that pe is based on: 1)future growth rate. 2) return on equity. 3) market dominance. 4) earnings predictability. INTC is screwed on #4, and relatively weak on #2.(Not compared to IBM, F, C, T, etc) Right now csco, and msft pass this test with flying colors. amat does poorly, too. gene p.s. pe is also effected by short term e shortfalls.

To: Mary Cluney who wrote (41241)	12/1/1997 10:20:00 PM
From: Barry A. Watzman	Read Replies (2) \| Respond to of 186894

Mary, WE (Intel stockholders) determine P/E. We do it by setting the price we are willing to pay. If the prevailing marke was willing to pay $120 for Intel, the P/E would be 30. The market is not willing to pay this right now, it's only willing to pay $80, so the P/E is only 20. Why ? Forgetting all of the analytical answers that you will get, this is a mass psychology issue, a chicken-or-egg question. If people had historically paid a price resulting in a P/E of 30, they would likely continue doing so, but for two decades the historical P/E has been "20-ish", so, for now, and likely for some time to come, people won't pay more. All of the financial and analytical stuff is mostly fluff, it does not really explain anything. If EVERY SINGLE INTEL STOCKHOLDER refused to sell his stock until he got a P/E of 30, the P/E would be 30, but this just will not happen. By the way, that still leaves the question of just what the "E" is -- the past twelve month's earnings, the estimated next twelve months earnings (which no one can know for sure to begin with), or something else.