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Technology Stocks : America On-Line: will it survive ...? -- Ignore unavailable to you. Want to Upgrade?

To: Raymond who wrote (9931)	5/7/1998 3:38:00 PM
From: Keith A Walker	Read Replies (2) \| Respond to of 13594

Raymond, As I understand the Forbes article and the analysis that was done, the new EPS diluted numbers provided in earnings statements are not accounting for dilution due to the effects of companies issuing options to employees. The problem lies in the fact that the issuance of the options is never counted as a cost. That's right. This really translates into higher labor expense than is reported, hence, earnings are being overstated even on a fully diluted basis. The danger here is that current P/E estimates and trailing numbers are not completely accurate and that if the options were expensed these P/E's would look higher than they are already. In fact, the article claims the multiple on the S&P 500, currently around 28, should actually be 35 due to the unreported expense of issuing options. Again, I suggest this as reading to the long-term investor who is questioning current market valuations. As we have found out that in the short-run any P/E is acceptable these days. The article is the front page feature: forbes.com