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Corrections Corporation of America Message Board

  • mecosmo2 mecosmo2 Nov 8, 1999 8:19 AM Flag

    The TRUTH about the market!

    Why we should stay with PZN!

    As we look
    ahead for, say, a decade, we know�we know�(what the
    hell do we know)that the future contribution of

    dividend yield will begin at, not 6%, but 1.3%. As to
    future earnings growth, perhaps it will be
    better
    than the rate of 7% for the past 40 years, but I would
    not bet the ranch on much more
    than that�and
    maybe even less. Together, those fundamentals would
    lead to a market
    return of 8.3% annually. To do
    better would require the price-earnings ratio to rise
    well
    above its present all-time historic high of 28
    times.

    So, let's play a little game. With an
    unchanged P/E ratio, we know that the market return

    ought to be about 8%�perhaps 1 or 2 percentage points
    more or less. If the price-earnings
    ratio falls
    to, say, 18 times, the total return on stocks would
    be not 8%, but 4%. And if the
    ratio rose to 71,
    the total annual return on stocks would be 18%.


    With a 20% return or there about, PZN looks like
    a pretty safe bet...

 
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