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Strategies & Market Trends : Shorting stocks: Broken stocks - Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Eric Klein who wrote (940)	3/19/1998 9:43:00 PM
From: Mike McFarland	Read Replies (1) \| Respond to of 2506

If only it were as easy as Price to Sales techstocks.com Microsoft Price to Sales ratio is 15.3 and my MSFT puts will die a peaceful death tomorrow I am sure.

To: Eric Klein who wrote (940)	3/20/1998 3:09:00 AM
From: F. Lynn	Read Replies (1) \| Respond to of 2506

I would be careful valuing these stocks. Keep in mind that with media broadcasting companies, and to a lesser degree consolidation plays like the outdoor advertising companies, one rarely uses P/S or P/E. The main valuation metric would be P/CF. The reason: these companies have low asset requirements, and very high gross margins{which makes P/S less useful, particularly when comparing to other industries). These companies are often acquired on the basis of their cash flow, and their balance sheets build up large intangible items. You have to back out the D&A when valuing them, since any potential acquirer will too. This is not to say they are not overvalued--I am not familar enough with them to know. But be careful in applying valuation metrics--most of the commonly used ones would not give accurate assessments of these companies.