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Technology Stocks : THQ,Inc. (THQI) -- Ignore unavailable to you. Want to Upgrade?

To: Jean-Philippe Chevalier who wrote (3610)	2/27/1998 12:41:00 AM
From: Jeff W.	Read Replies (1) \| Respond to of 14266

Error re: THQI's Numbers? In all the excitement today no one noticed a major error published by Briefing.com regarding THQI's valuation (they printed an unfavorable piece comparing THQI to EIDSY). The article contrasted THQI's fundamentals with those of EIDSY, and reached the conclusion that based on current share price, FY '98 EPS, and future growth rates, EIDSY was a better buy based on a PEG analysis. The problem? Look closely at the FY '98 number they used for THQI: From the article: <<Fundamentals oFY98 Earnings Estimate: EIDSY= $1.23; THQI= $1.18 oPrice/Earnings Multiple: EIDSY= 14.63; THQI= 26.38 oLong-term Growth Forecast: EIDSY= 25% per annum; THQI= 25% per annum oPrice/Earnings Growth Ratio (PEG): EIDSY= 0.58; THQI= 1.05>> Notice that Briefing.com used $1.18 as an FY 98 earnings estimate for THQI, despite the fact that based on the Q4 blowout, THQI did $1.35 in 1997! From yesterdays conference call we learned that Farrell is comfortable with 35% fully taxable EPS growth. That would result in FY 1998 EPS of $1.82 -- 54% higher than the $1.18 used in Briefing's analysis. At $1.82 in FY 1998 EPS, and today's closing price of $30, THQI has a forward PE multiple of 16.48, not the 26.38 cited by Briefing. At a 35% growth clip, that would equate to a PEG of .47 vs. the 1.05 in Briefing's analysis, indicating that according to traditional valuation methodologies, THQI is still significantly undervalued. Think Farrell's growth projections are too aggressive? Fine, let's use the 25% 1998 growth rate used by Briefing and re-run the numbers: FY 1998 EPS: $1.35 (FY 97 actuals) x 1.25 (estimated '98 growth rate) = $1.69 Forward PE ratio: $30 (today's closing price) / $1.69 (est. '98 EPS) = 17.75 PEG: 17.75 (forward PE) / 25 (expected 98 growth rate) = .71 Though not as dramatically undervalued in this more conservative scenario (PEG of .71 vs. .47 in the 35% growth scenario), the .71 PEG is still significantly lower than the 1.06 figure cited by Briefing. If the above analysis proves correct we should try contacting Briefing and make sure they run a correction.