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Technology Stocks : TLAB info? -- Ignore unavailable to you. Want to Upgrade?

To: Rafael Silva who wrote (5432)	4/23/1999 11:51:00 PM
From: llwk7051@aol.com	Read Replies (2) \| Respond to of 7342

I think the author is applying the multiple to the wrong earnings for Jan 2000 value. He is using 1999 earnings not 2000 earnings estimates if I understood the post correctly. If I am correct this explains his 6% return. Also read this post Message 9115677. Very informative about pe ratios. I will admit determining fair value is a lot harder than finding a good stock you would like to own for several years. That is why I liked the post on pe ratios. I personally have been badly burned on stocks such as Merck and many others by paying to much attention to the pe ratio vs growth rate. I sold way to early. I suggest you consider doing your own multi year analysis of earnings and discount them back to a present value. That method will give you another gauge of current value and future potential. But one thing you will note is all values are based on estimates of unknown future events. That is what makes valuation so difficult in my opinion. Hope this helps. Please note I am not giving any opinion on what I think of the current price. I am long on Tlab and have been for several years. Good luck, Robert D.

To: Rafael Silva who wrote (5432)	4/24/1999 12:22:00 AM
From: Chuzzlewit	Read Replies (1) \| Respond to of 7342

Rafael, I have lots of comments. Mainly this "analysis" is rationalization rather than real analysis. Here is what Jubak did (stripped of a lot of verbiage): 1. He said that current earnings looked clean -- they were not rigged to look better than they really were. I concur, but we will not have a complete picture until the SEC filings. 2. He estimates earnings for the year at $2.55. Perhaps this is reasonable, but it is probably not correct. Generally speaking it is impossible to have that much visibility. The company periodically meets with analysts to provide guidance as events unfold. A good portion of this guidance consists of managing earnings expectations, which means that companies try to set the bar lower rather than higher. 3. Jubak then assumes a market multiple based on trailing earnings. This is a terrible practice. Stock multiples are awarded based on several factors, not one of them being a trailing P/E -thank you very much Ben Graham (NOT). Stock are priced on the perception of future earnings growth, LT interest rates, general market conditions, and perceived risk. Hello Jubak!!! where did you discuss this stuff? Interest rates look benign. Birck announced 6B by 2003. That works out to 34% per annum (assuming 3 3/4 years to achieve the goal). And Birck has always exceeded his goals. So I think that an eps growth rate of the order of 37% is probably closer to the truth (and probably still conservative). So, let's compare that to the S&P 500 which has a long-term growth rate of around 9% and sports a market multiple of around 27x next years earnings. So, applying a CNPEG relative valuation we come up with the following: The YPEG for the S&P is around 3, and the YPEG for TLAB is 1.14, which puts the ratio to around .38. That means that the cost of growth using TLAB is 38% of the cost of growth for the S&P as a whole. 4. Finally, he takes his target price and calculates a 9 month return based on his target. That's fine if there is any validity to the target. As I hope I've shown in 3 above, I don't think there is any validity to Jubak's target. In fact, he could just as easily asked whether the current P/E is justified. Since he thinks it is not (because if it were the stock would be appreciating at a rate of at least the growth rate) he could have stopped there. But I guess the guy feels like he has to write a lot to justify his P/E <G> Rafael, Jubak's approach is appealing because it is simple, but unfortunately it is simple-minded. It is replete with assumptions that are unsupportable. One point he does make, with which I completely concur is that you need to carefully check the "quality" of earnings, and you need to look carefully at the company's SEC filings. But what do I know? TTFN, CTC

To: Rafael Silva who wrote (5432)	4/24/1999 12:30:00 AM
From: Jim Furley	Read Replies (1) \| Respond to of 7342

Jubak must have bumped his head. Tellabs is not a sell. The company has a superb balance sheet, a low PE compared to other high flying techs, it has 29 brokerage houses pushing it as a buy or strong buy, has good earnings growth with consistent and recent earnings surprises, numerous products in high demand with who knows how many on the drawing board. Technology/Communication stocks are the place to be and Tellabs is definitely one to own. There are many people with opinions, but only one opinion counts, and that is "what does the market think?"... and we all know the answer to that. Jim