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Technology Stocks : Vitesse Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: MoonBrother who wrote (2094)	12/14/1998 11:31:00 PM
From: A. Edwards	Read Replies (1) \| Respond to of 4710

Let's compare the valuation on both AMCC & VTSS, you'll see why Needham downgraded AMCC last week when the stock was at $39.375: A popular ratio for valuing growth stocks is the PEG ratio. The PEG ratio (Price-to-Earnings-to- Growth or PE ÷ the Growth Rate) is based on Peter Lynch's basic theory that a stock should trade around the price where the PE = the Growth Rate. The PEG ratio would therefore equal 1. PEG Value simply takes this theory and calculates a price. The calculation is simply the estimated earnings per share for next year times the estimated long-term growth rate. AMCC's estimated growth rate is 31.67% its EPS for next year is $1.0 PEG value= $31.67 current price (12/14/98)=$32.44 OVERVALUATION= $0.77 % overvaluation= 2.37% VTSS's estimated growth rate is 41.94% its EPS for next year is $1.16 PEG value= $48.65 current price (12/14/98)=45.31 UNDERVALUATION= $3.34 % undervaluation= 7.37%