Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : TAVA Technologies (TAVA-NASDAQ) -- Ignore unavailable to you. Want to Upgrade?

To: Hawkmoon who wrote (12100)	3/2/1998 6:00:00 PM
From: Jack Zahran	Read Replies (1) \| Respond to of 31646

This whole discussion of giving Y2K earnings a PE of 1 is ludricous. I agree. I think the analysts who believe that a P/E of 1 is appropriate are being lazy and simply don't understand the business.

To: Hawkmoon who wrote (12100)	3/2/1998 8:24:00 PM
From: michael tantleff	Respond to of 31646

well said!!!

To: Hawkmoon who wrote (12100)	3/3/1998 9:24:00 AM
From: Skeptic	Read Replies (4) \| Respond to of 31646

This whole discussion of giving Y2K earnings a PE of 1 is ludricous. You guys just don't get it. No one is saying that Tava's Y2K work isn't going to help their core business. You value nonrecurring cash flows (or earnings) by summing their present values. You value recurring earnings by applying a multiple to next year's earnings that is based on the expected growth rate and an assessment of the risk involved. Any impact on the core business due to Y2K would show up in the growth rate following Y2K. Trouble is, Tava's competitive advantage is their compliance database which is of little value to their previously unprofitable core business. Yes, they will build valuable relationships. But they will also be in a much more competitive environment without the benefit of their primary competitive advantage. The present value of expected Y2K earnings is around $2-3, so the core business is being valued at $5-6. The Hanifen Imhoff analyst valued the core business at $2.70 to $3.60 without any Y2K benefit. So the market is already valuing the Y2K impact on the core business at $2-3, or roughly equal to its value without Y2K. The key to the value of Tava is the fairness of this valuation of the Y2K impact. Is it conservative, aggressive, or about right?