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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (21304)	7/9/1998 2:15:00 PM
From: Proud_Infidel	Read Replies (2) \| Respond to of 70976

GM, Re:Let's say RD is fixed. Now I add a wildly fluctuating earnings number. The sum will be higher than EPS alone and will fluctuate less percentage-wise. So HOW do I see "cheapness" in the stock sooner? Murphy's assumption is that money spent on R&D will prove enormously profitable once the goods are brought to market. Looking at EPS alone does not show the potential of a company like AMAT should EPS fall to $1 or zero for a given year b/c of world events that really do not affect the long-term viability of the company. The essence of the valuation strategy is that eps looks at the outcome of past business practices and looking at R&D helps one gauge what the future income will look like. BTW, he adds that great growth flow companies are growing rapidly, spending a lot on R&D, making a profit, and dominating a niche. Over the last three years, roughly 100 companies he considers great GF have reported at least 15% growth in sales, 15% pretax profit, and 7% of sales spent on R&D. Re:Put differently, if all earnings were used for R&D If this is the case, you're probably invested into a company like AMD, which has no choice but to plow the earnings into fighting the Goliath, and will wind up penniless;-(( Don't know if this helps. BK