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To: Loren who wrote (87844)	1/5/1999 3:26:00 PM
From: Chuzzlewit	Read Replies (1) \| Respond to of 176387

Loren, in a rational market P/E expansion or contraction depends on three things: 1. The general view of the future of the company. If a company's prospects begin to look up for the long term, P/E will begin to expand; 2. The general outlook for interest rates. If long-term interest rates fall, stock prices tend to rise (and with them P/Es); and 3. Discovery of an "undervalued" stock by the public. As more analysts and pundits begin to observe a well-positioned but under-followed company, its P/E tends to rise. Finally, you should be aware of the fact that as companies mature, and as it becomes more difficult to increase market share (which translates into growing faster than its market niche) P/Es contract. This is just another way of saying that the long-term rate of growth of disposable cash flow along with long-term interest rates are the two greatest determinants of P/E for visible companies. TTFN, CTC