Re: [CANSLIM] SYK

From: Chazmoore@aol.com
Subject: Re: [CANSLIM] SYK
Date: Wed, 20 Mar 2002 06:59:55 EST

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Tom: A few months ago one of the TV "bears" commented that a stock market 
recovery could not occur until the P/E ratio's fell significantly. In other 
words, stock prices are too high, or earnings too low. He noted that the S&P 
500 Index P/E was (at the time) 28. Since I don't trust the S&P 500 Index 
averages I started to research the P/E ratio of Industry Groups, as defined 
by IBD. I am far from complete but my initial findings indicate that, with 
the exception of the technology sector, average P/E's really are not that 
high. Credit card companies like Capital One Finance (COF), and MBNA (KRB), 
have an average P/E of about 22; 8 points below the current S/P Index average.
So, what is the point? I use this to determine if the stock P/E is in line 
with it's own industry. It could also be used to determine a target price to 
sell the stock in the future. While there are notable exceptions, (CSCO, 
QCOM, JDSU), most stocks get downgraded when they hit P/E ratios inconsistent 
with analyst projections, and this causes a price decline.
(Maybe I have more time than sense.)

Charley 















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<HTML><FONT FACE=arial,helvetica><FONT  SIZE=2>Tom: A few months ago one of the TV "bears" commented that a stock market recovery could not occur until the P/E ratio's fell significantly. In other words, stock prices are too high, or earnings too low. He noted that the S&amp;P 500 Index P/E was (at the time) 28. Since I don't trust the S&amp;P 500 Index averages I started to research the P/E ratio of Industry Groups, as defined by IBD. I am far from complete but my initial findings indicate that, with the exception of the technology sector, average P/E's really are not that high. Credit card companies like Capital One Finance (COF), and MBNA (KRB), have an average P/E of about 22; 8 points below the current S/P Index average.
<BR>So, what is the point? I use this to determine if the stock P/E is in line with it's own industry. It could also be used to determine a target price to sell the stock in the future. While there are notable exceptions, (CSCO, QCOM, JDSU), most stocks get downgraded when they hit P/E ratios inconsistent with analyst projections, and this causes a price decline.
<BR>(Maybe I have more time than sense.)
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<BR>Charley 
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