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Stocks M / Microsoft Corp.

URL:  http://boards.fool.com/lynchfan-wrote-gtone-cautionary-note-if-msft-10368455.aspx

Subject:  Re: Is it Right time to Buy MSFT Date:  10/15/1998  10:05 AM
Author:  0to60 Number:  4289 of 156914

LynchFan wrote:
>One cautionary note, if MSFT drops to this PEG and >the market is diverging (going up), watch out below! >Up till recently, there was no market risk and no >business risk discounted into MSFT shares. We are >just now getting to discounting out market risk.

That doesn't really answer his question. Sure, if MSFT's PEG was 1.5 or less, it would look like a great buy. But it ain't. And it might not ever get that low (if it ever does, I would assume the company is in trouble). In the meantime, ramurthur doesn't own the stock and isn't making (or losing) any money.

Besides, PEG's aren't necessarily the way to evaluate companies like this. If you went by PEG, you would never have bought AOL or PFE, and thus missed out on a lot of profits. I think you have to compare MSFT to other companies in the same industry. Right now, MSFT trades at 60 times earnings, whereas the industry average is over 70. MSFT is a strong, solid growth company with nearly flawless fundamentals.
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