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Technology Stocks : TAVA Research - No Discussion -- Ignore unavailable to you. Want to Upgrade?

To: Steve Sanchez who wrote (784)	2/6/1999 2:41:00 AM
From: John Mansfield	Read Replies (2) \| Respond to of 810

PEG calculations - 'To: John Mansfield (27484 ) From: JDN Friday, Feb 5 1999 5:24PM ET Reply # of 27488 Dear John: Using trailing earnings including this qtr estimate comes to 43 cents. Using rough current price of $7.50 leaves you with a trailing PE ratio of 17.44. Tough part is the growth. If you calculate the compound growth this previous 4 qtrs 1, 3, 14, 25 you get a ridiculously high growth rate which cannot be sustained. I am going to only calculate the growth rate from last qtr to this (est) qtr. ie 14 to 25 cents or 79%. That gives you I believe a PEG of 22 (17.44divided by .79) I would say that .22 is substantially below 1.0. So, what does this all mean? To me it means either price must rise or growth rate must fall. However, we are at such a plateau now that even if growth rate slows the PE also would drop. Running at perhaps a $1.00 per share rate looking forward (yes, I am including taxes). So even assuming absolutely no growth leaves you with a PE ratio of 7.5 which certainly seems low in this market. But, if the market decided that TAVA was only worth a 7.5 PE then the growth would only have to be 7 1/2% annually to satisfy the market. ie 1 to 1. You can work it anyway you want but I think you will have to ultimately agree this is likely the BOTTOM price level after this earnings report comes out. JDN