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Author: PsychoDaisies Big red star, 1000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 836  
Subject: Re: PEG of .21,,? Date: 10/23/1999 3:20 PM
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Liraxyz,

Innovex's earnings are falling. How could you have a positive PEG ratio? Anyway, analysts don't know when the disk drive industry will return, so I wouldn't care what "estimate" they put on the stock.

0.50 or less Undervalued
0.50 to 1.00 Fairly Valued
1.00 to 1.30 Richly Valued
1.30 or more Potentially
Overvalued


Man, I am sorry, but I just cannot agree with this theory. I think the PEG is a terrible thing to rely on. I don't see how TMF can promote buying stocks like eBay at outrageous prices and then turn around and suggest using this formula. Applied Magnetics had a PEG of .4 when it was trading at $35, and now it's trading at 7/8 a share.

Look at how long Microsoft has been overvalued!!!

Stocks usually look cheap when the company is still earning money but becoming worse!! Say earnings come out $.05 a share next quarter and the stock falls. It will really look cheap based on estimates. But chances are, analysts are going to revise them downward.

Also, the disk drive industry is cyclical. Cyclical stocks tend to trade at low valuations. When the company is in an upswing, it will most likely keep a low PEG, thus luring many people into what they feel is an undervalued rapidly growing stock when it's really fairly priced or overpriced.

All IMHO. But history does show that cyclicals tend to trade at low valuations.

Take care, and good luck.
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