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Starbucks Corporation Message Board

  • HerseyHawkins HerseyHawkins Mar 5, 1998 10:08 AM Flag

    Branding a commodity

    Some stocks (YHOO, XCIT, LCOS, SEEK) should not be valued on a P/E basis because most of their value is in the customer bases they 'own."

    Many stocks (cable, cellular) trade on EBITDA mutiples.

    PC makers trade on P/E and should be valued on a P/E basis with attention to P/E to long term EPS growth rate.

    An everage company should have a P/E to growth rate of 1. Why do the auto stocks have a P/E of 8? They grwo at 8%.

    Companies which never miss numbers, have awesome margins, have a great brand name, monopoly power and do not sell commodity products (MSFT) deserve a P/E way above the growth rate. MSFT has a P/E of 55 even though it is a 25% grower.

    Companies which miss numbers about once a year, have awesome margins, have a great brand name, monopoly power and do sell commodity products (INTC) deserve a P/E a little above the growth rate. INTC has a P/E of 25 even though it is a 25% grower.

    Companies which never miss numbers, have tiny tiny tiny margins, have a great brand name, zero monopoly power and sell a commodity product "albeit a branded one" (DELL, SBUX) deserve a P/E near the growth rate. DELL has a P/E of 50 even though it is a 27% grower.

    Compare MSFT's P/E to its comps and you will see that it is at the high end of the range. Compare DELL's P/E to its comps and you will see that it is beyond the range.

 
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