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

To: jach who wrote (24621)	4/25/1999 12:36:00 PM
From: jach	Respond to of 77397

If CSCO gets IBM's PE multiple what will its price be: Let's see: IBM PE is about 30 only, in fact IBM earnings growth last qtr was about par with CSCO CSCO current PE is more than 120. So, simple calculation said, if CSCO gets IBM PE multiple it should be at 0.25 of its current price. And that is about 40$ only. All imo.

To: jach who wrote (24621)	4/25/1999 12:37:00 PM
From: Uncle Frank	Respond to of 77397

Morning, Jach. Comparing csco and ibm p/e ratios is an interesting exercise; got me comparing their fundamentals. My conclusion is that magnitude of revenue change isn't the key; we should be looking at growth. I threw Mr. Softee into the pot and came up with the following: Company 5 yr. revenue growth ttm p/e IBM 5.6% 28 MSFT 30.4% 67 CSCO 57.1% 138 I'm not a financial analyst, but superficially, the relation between revenue growth and p/e seems pretty evident based on this sample. Maybe Chuzz will provide some insight into the matter if he reads this. Frank

To: jach who wrote (24621)	4/25/1999 1:26:00 PM
From: Brian Malloy	Read Replies (2) \| Respond to of 77397

You keep doing this jach: In your own words: "Simple logic said CSCO is way overpriced." and you go on to talk talking about earnings and market cap and so forth and so on relative to IBM. However, you forget one key measure - something that an undergrad taking their first course in accounting or financial management gets drilled into their head. Without a relative measure such as ROI or ROE everything is just a number. If CSCO spends $1 and makes $1.40 while IBM spends $1 and makes $1.15 then perhaps that is why CSCO can carry a high PE? Your lesson is to read up on ROI and ROE and report back to the class. Also David Dreman, a great value investor, picks only two tech/inet stocks that may be appropriately valued given his models. They are CSCO and AMZN. Regards