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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: Robert Sherman who wrote (21930)	3/15/1998 7:58:00 PM
From: John Koligman	Read Replies (1) \| Respond to of 97611

In addition, on a price to sales basis CPQ is cheaper than IBM. Last time I looked, IBM sold at a PSR of around 2. CPQ/DEC merged has a PSR with a decimal point in front of it, maybe around .75 or so. John

To: Robert Sherman who wrote (21930)	3/15/1998 8:02:00 PM
From: van wang	Read Replies (1) \| Respond to of 97611

Robert I am going to save you some money...dont kill the messenger investor should look at forward PE not trailing...the price you pay is for future cashflows and not past...FY 1998 earnings for CPQ is $0.88 cents and for FY99 $1.68...so CPQ is trading at 28.6 X FY 98 earnings...that is fine if their growth rate was 30%...but its projected to be 20%...so its forward PE is 1.45X its growth rate...if PE trades at growth rate (fair value by convention) then CPQ is $18 IBM FY 98 eps is est. 6.52...the current share price trades at 14.6X forward...its growth rate is 10%...its PE is about 1.45X its growth rate the reason IBM is better IMO is the predictability of its earnings, brand name and corporate relationships....lower risk...CPQ has many near term issues...so if sector moves...IBM will fair better up or down IMO

To: Robert Sherman who wrote (21930)	3/15/1998 11:57:00 PM
From: Greg Jung	Read Replies (2) \| Respond to of 97611

A PE of 22 for a computer company implies a high confidence in continued sales growth and margin levels. At least you can say, whether it is justified or not, the market will again be optimistic about the company and afford it a higher price in whatever time frame you think of selling - barring a worldwide recession. In absolute terms it is still not cheap (view chart extending back more than a couple of years). Relative to Dell it is a no-brainer that CPQ is cheaper. CPQ acquired a lot of stuff from DEC at ultra-cheap price, and the question (concern, I suppose) is if they can manage it into higher profitability without de-constructing its potentials. Anyway, I couldn't say whether the industry as a whole isn't overpriced on a realistic basis - i.e. there may be inevitable turn-downs on the years to come so that 20 years from now we'll still be talking about $30b revenues (inflation adjusted) and a 6% margin. In that case it would still be in a $30 - $60 range and we'd be moaning about not getting a dividend along the way. But in that case I can't believe that Dell will be out there with near trillion dollar revenues its current multiple implies. Greg

To: Robert Sherman who wrote (21930)	3/19/1998 12:30:00 AM
From: Andreas	Respond to of 97611

One slight problem. How the heck is cpq supposed to earn $1.80/shr. this year? We already have one annual forecast at about $.38. That's right - 38 pennies per share. Let's assume they're way off base and cpq in fact earns twice that. Then at 22 times earnings the stock is worth about $16.72. Of course that begs the question - why should cpq be entitled to a pe of 22 with stunted growth? After all cpq is not the high quality, high growth, high profitability company like - Yahoo or Excite or AOL (tongue in cheek). In reality it is quite pointless to try and guess right now what they will earn in 1998. There isn't a single forecast out there (Zacks or First Call or whoever) that is credible right now. No one knows and no-one can know. Call up your broker if you have one and ask him/her what your brokerage has as earnings forecast for cpq for 1998. He's likely to tell you that the only number they have is 30 days old, is therefore obsolete and therefore it's anybody's guess.