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Nautilus Inc. Message Board

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  • astral_tsar astral_tsar Mar 12, 2003 7:07 PM Flag

    Margins and ratios

    Subj: Re: Margins and ratios
    By: aluisious81
    Date: 03/12/03 11:01 am

    "Investors won't go for falling earnings. There's no future there. "

    Well, thanks for the input ... but I was looking more for a number.

    Maybe I can ask another way. At what multiple of annual earnings do folks feel that NLS becomes a good buy? 4 times? 3 times? 2 times? 6 months' earnings?

    And if earnings growth is the only thing that gives investments value then why have the bond wonks bid 10-year treasuries up to more than 25 times annual earnings on that investment?
    Those earnings don't grow at all, yet people are paying a huge premium -- presumably to avoid risk of earnings decrease.

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    • You're answering your own question. People pay premiums for *earnings they believe in.* If earnings are going to vanish, people won't pay much at all for the stock.

      As for earnings...they don't get distributed to shareholders. You don't see a single cent of any of those earnings if the company goes bankrupt later. The company is only worth investing in if it's going to last for a long time...ie, if an investor can sell their stock to someone else one day. The lowest PE in the world doesn't mean dink if people think the company is going under sooner or later.

      • 1 Reply to aluisious81
      • Aloisius, you inadvertently left out your favorite multiple of earnings (that would be a number, typically an integer between 1 and 20). Care to take another stab at it. PE = 2? PE = 1?

        In my primitive mind, I'm thinking that slowly-growing earnings are just slightly different from earnings that "are going to vanish". Did I get that wrong?

 
NLS
15.09+0.04(+0.27%)Mar 27 4:02 PMEDT