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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: conrad grant who wrote (22120)	2/7/1999 3:04:00 AM
From: ed	Respond to of 77400

Talking about PE , there is another model to well explain why stocks in different industries will have different PE. A house in San Francisco will be priced at one Million dollars, while the similar house in a small town of the middle West will be priced in 200K. What is the difference between the two houses which cause such a big difference in value ? Well, it is because the location , and demand for housing in these two different market is different. The same thing for PE of different industries. We all know that the PC , the networking, the telecommunication are growing industries, and the demand will continue grow explosively in the future, that is the reason why companies in the above industries will enjoy a higher PE than the companies in the chemical , sugar water industries , where the growth is saturated , and will grow very slow in the years to come. If a company can enjoy strong growth and profit in the next twenty years , then this company should enjoy a higher PE than the company which will expect low growth or no growth at all. This means , the future growth potential of a company is already built into today's price of company's stock , that means higher PE. IF KO had a PE of 100, it will worry me to death, because we know that the growth of the company in the future is limited and slow, then why the future growth should be built into the stock price of today ?