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Biotech / Medical : Coherent (COHR) : Anyone else holding? -- Ignore unavailable to you. Want to Upgrade?

To: Doug who wrote (414)	1/21/1998 5:22:00 PM
From: Andrew	Read Replies (1) \| Respond to of 788

Doug, not that I put much weight on P/E ratios, but since you pointed it out, Intel and Cohrent have virtually IDENTICAL P/E ratios. If INTC's 19.7 is "lofty", while COHR's 19.5 is "low"... Anyway, I know what you're saying. You dislike seeing free cash flow, it should all be invested for growth. I think they do invest it for growth, but your impression that the "market" disagrees with me is probably true. That's how I plan on making money long term with COHR. Your statement that COHR "has lost market share", evidenced by a low P/E and a bunch of new Laser Companies, seems a little off-the-cuff though. Are you suggesting that COHR is growing significantly slower than it's core market? I see a company with a strong position in a high margin business, rapidly expanding into other related high-margin businesses. It brings in more money than it needs to pay the bills, and uses it's free cash flow from time to time to fund this expansion. To top it off, you can buy a piece of it for a very reasonable price. Sounds like a good, solid long term investment to me! Andrew

To: Doug who wrote (414)	1/22/1998 4:21:00 AM
From: Khris Vogel	Respond to of 788

<The P/E of a stock is determined by the Market. The fact that the P/E for COHR is low vis a vis the high techs,indicates that it is treated by the Market as a Conservative Investment relative to other high techs. The market does not perceive the Company to be sufficiently aggressive in allocating its available resources and line of credits to improve its revenue and income growth percentages.> Just my experience - but I've found the term "high techs" to be very broad and vague. When you say that the PE is low relative to that of say, INTC, just how valid of a comparison is that? Two completely different industries, having not a lot to do w/ eachother. But if you want to cast a wide net, look back at what it was trading at a multiple of 8.3 at one point in 1995 and 8.6 in 1996. Does that suggest that Intel was not aggessively managed back then? I think we all know differently. Am I saying that COHR is in the same class as INTC? No, but few organizations are. But to say that just because co. is bashed around doesn't mean mgmt. is competent. Again, look at the slide in Intel's multiple a couple years back. Should Andy Grove have stepped down and put somebody 'more aggessive' in the job? Wall St. sometimes can be illogically fickle, and to suggest that the market is totally logical in how it values co.'s is not a defendable position. <I would be interested to know if there are any other reasons for the low P/E that COHR has had.> I believe they took a notable charge after buying a European co. last year, essentially writing off all that co.'s capitalized R&D. And this was followed by a quarter of lower than expected sales, causing them to miss a quarter. The strong dollar had a lot to do with a dramatic slowdown in orders coming in from Asia. All this coming within 2 or 3 qtrs. of eachother, some investor confidence was shaken. But if one does feel comfortable riding a turbulence, wouldn't one be rewarded? That's my take, for what it's worth.