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

To: Bill Day who wrote (2820)	7/29/1998 2:00:00 PM
From: The ChrisMeister	Read Replies (2) \| Respond to of 7342

"More on the PEG subject." I was back at the Motley Fool site (http://www.fool.com/) recently, where the PEG (P/E to annual earnings Growth ratio) has been most popularized as of late. It's in their Fool's School section; try to find Step 10 on growth stocks. They only say that they've found it to work sometimes with growth companies, but otherwise do not delineate the limits of the method or otherwise give any sort of a theoretical basis for why it should be a valid method of valuation (which I clearly think it isn't). They have no explanation for why a high-teens grower (like Coke) can trade at P/E's of something like 40 rather than, say, 18. That's just one example, but I think the PEG leaves a lot more unexplained than it explains. As I said before, the PEG's crucial flaw is that it's a linear calculation and therefore a gross over-simplification. Compounding is by nature non-linear mathematically. My advice would be to not be mislead by PEG ratios. As you said, it'll have you passing up the MSFT's, CSCO's, and TLAB's of the world. ChrisMeister