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Technology Stocks : TLAB info? -- Ignore unavailable to you. Want to Upgrade?

To: Bob Martin who wrote (2813)	7/29/1998 1:44:00 PM
From: Bill Day	Read Replies (1) \| Respond to of 7342

More on the PEG subject. You have to remember the market's fondness for consistency. If you feel eps growth will consistent, paying up for a high pe growth stock works out, ie CSCO. For instance, buying a stock with a 40% growth rate and a PE of 50 would still make you 30% per year over three years, even if the PE falls to 40 by then. On the other hand paying above the growth rate for slower growers seems risky mathematically. For example 20 x eps for a 16% grower would leave you with 7.7% annually over three years if the PE fell to 16. This scenario reminds me more of the dow stocks and big drug stocks. Unfortunately any high PE scenario leaves us with a longer way to fall, if we encounter unexpected problems. This is just something I've thought about while kicking myself for not buying MSFT, CSCO, and TLAB, years ago when they were "overpriced". Bil Day

To: Bob Martin who wrote (2813)	8/5/1998 2:45:00 PM
From: Jay Pasch	Respond to of 7342

Bob, have you run through a discounted cash flow model on TLAB? The process seems valuable, albeit confusing. Why assume a 9% discount rate, when the long-bond is currently ~%5.7? Also, how would residual value (second stage in the model) be calculated if TLAB's second-stage growth is deemed to be above the current long-bond rate (long-bond rate minus TLAB's second-stage growth rate would yield a negative number)? It would be interesting to see what numbers you come up with, based on the source you mentioned (See note-44 p.268). Thanks in advance....