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

To: Mike Gordon who wrote (22909)	3/22/1998 1:20:00 PM
From: E.H.F.	Read Replies (3) \| Respond to of 97611

Mike, I think the lowest estimate by any analyst this year is .68. From 1991 to 1997 CPQ's eps grew at a rate of 37.09% compounded. I believe that their eps will continue to grow because world wide demand isn't even close to being tapped out. Their problem now is very short term. I'm long (real long) and this what I've come up with: Assuming they earn .68 this year, and assuming best case scenario, using eps growth rate of 37.09% compounded per year, in ten years they will be earning $15.94 per share. Using a P/E of 20, share price will be $318. Given today's price of 23 that works out to 30.07% compounded annually. Next case, assuming 25% eps growth rate compounded, they will be earning $6.33 per share in ten years. Using a P/E of 20, share price will be $126.6. Given today's price of $23 that works out to 18.6% compounded annually. Next case, assuming 20% eps growth rate compounded, they will be earning $4.21 per share in ten years. Using a P/E of 20, share price will be $84. Given today's price of $23 that works out to 13% compounded annually. The price you pay above or below 23 will lower or raise your rate of return. It all depends at what you see for the future, but what I see is that there are only 200 million PC users in a world wide population of 5 billion people. The real growth hasn't even started yet, and Compaq will get a big portion of it. I think their eps growth rate will be even better than 37% compounded. I know that this number looks real high, but that's the magic of compounding. I bought in at 27 so my rate will be lower than the people buying in now, and if I wasn't fully invested I'd be buying more. E.H.F.