Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Network Appliance -- Ignore unavailable to you. Want to Upgrade?

To: Miguel Octavio who wrote (703)	3/2/1999 12:11:00 AM
From: michael modeme	Read Replies (3) \| Respond to of 10934

Hey Miguel, Yes, I agree (and have stated previously) that there are some assumptions of my argument that are oversimplifications. I only wanted to illustrate the point that comparing growth and P/E ratios is complex. If NTAP and EMC were growing at the same rate, then your argument would be correct (assuming that the rates are constant). But you specifically stated that NTAP is growing faster than EMC, which complicates the analysis. Really, what one should do is estimate the function that best predicts the growth of a company, and then use a differential equation that utilizes the changes in P/E ratios to value a company (or at least I think this does a better job). In actuallity, the 5 year time period doesn't matter -- I just wanted to point out that if P/E ratios are constant, then the stock price will grow as fast as the earnings growth rate, which in NTAP's case is higher than EMC's case. And as a side point, an even better model uses certain types of diffusion equations to model stock prices, and predict valuation and estimated rate of return. Heck, buy 'em both and you'll most likely do fine and reduce your risk! They're both great companies. Cheers. P.S. if you're mathematically-inclined I can post some of the equations that many theoreticians are using to value companies and predict stock price returns.