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Stocks R / Raytheon Company


Subject:  Re: Turning it around Date:  2/3/2000  8:46 PM
Author:  RandGraham Number:  157 of 482

Cheap? First cheap is not good. Inexpensive is good. I hope this stock doesn't get cheaper. Also from a simple pe ratio type of view point, this stock does not appear inexpensive in my eyes. Here is data from today:
Ticker - P/E
rtnb 16.79
noc 7.22
lmt 9.73
ba 17.92

(Raytheon, Northrop Grumman, Lockheed Martin, Boeing)

Raytheon is the third largest defense contractor and it trades at the second highest P/E ratio of the top four defense contractors. By looking at the p/e ratios, wouldn't you agree that Northrop is the least expensive? Especially in light of the fact that Northrop hasn't surprised analysts twice in the last 6-9 months?

I have serious concerns about the increase in the stock price of rtnb. Isn't it fair to compare it to other companies that it competes with? How much can the price of rtnb increase given that other companies in the same industry all trade at similar or lower p/e ratios? Also, don't the earnings of defense contracts depend on the defense budget, which has done nothing but shrink since the Gulf War? Is there any upside potential in this stock? Especially since its 52 week high was based on inflated earnings estimates?

I really have a hard time seeing how the valuation of rtnb will significantly increase. Let me know your thoughts on Raytheon and the p/e comparison that I have done above.
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