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.

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

To: Teri Skogerboe who wrote (21372)	7/10/1998 1:45:00 PM
From: Math Junkie	Read Replies (1) \| Respond to of 70976

Hi Teri. A while back I was talking about the effect of S&P 500 valuation on AMAT's low. Last weekend on his radio program, Bob Brinker mentioned that the S&P 500 P/E two years ago was 16, and that it is now 50 per cent higher. (I believe these figures are based on operating earnings.) On the principle that a stock's valuation should be judged in comparison to that of the broader market, if we apply that same premium to the historic figures which you posted for AMAT's price-to-sales in previous lows, which were in the range of 1.0 to 1.5, if I recall correctly, then we would come up with a forecast range for P/S of 1.5 to 2.25. Baseline Financial Services currently shows a P/S of 2.26, which was based on last Friday's close of 29 11/16. So we are now at the top of the range. If we get back down to the 52 week low, which was 25 1/2 on December 12th, that will be P/S of 1.94, near the middle of the range. Based on this, I think it is at least plausible that 25 1/2 could turn out to be the low for this cycle. The bottom of the range, a P/S of 1.5, would be about 19 3/4. If that happened, I would expect it to coincide with a correction in the S&P. Best regards, Richard