Go to Jeff Salisbury LWGate Home Page.From: "Katherine Malm" <kmalm@earthlink.net>
Subject: PE Expansion (was Re: [CANSLIM] SYK)
Date: Sun, 24 Mar 2002 18:11:21 -0600
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Thought I'd add to the resource that jans provided by uploading a couple =
of Investor's Corner articles on using PE for targeting sells:
(1) Use P-E Ratio Growth To Forecast Sell Point (7/17/01) =
http://WallStreet-LLC.com/pub/PEtoFcstSell.jpg
(2) Track Stock's P-E Expansion to Size Up Gains (6/9/00) =
http://WallStreet-LLC.com/pub/PEExpansion.jpg
Katherine
----- Original Message -----=20
From: Spencer48@aol.com=20
To: canslim@lists.xmission.com=20
Sent: Wednesday, March 20, 2002 1:30 PM
Subject: Re: [CANSLIM] SYK
Katherine:
Your E-mail on P/E reminded me that WON sometimes uses the P/E =
ratio to=20
guage when to sell the stock. Here is what he said June 4, 2001 in =
Ask WON=20
(on investors.com) regarding P/E vis =E0 vis selling: =20
"Your sell rules are the principal guide on when to take a =
profit. But=20
sometimes we use the price/earnings ratio to calculate a price where =
you may=20
exit a stock. Basically, you may start considering selling when the =
stock's=20
PE ratio expands 130% from the time it broke out from a first-stage =
base.=20
Example: XYZ stock's PE (or p/e ) ratio is 45 when it breaks out. =
Calculating=20
a 130% expansion, you get a PE of 103.5 [45*1.3 +original45PE]]. Next, =
you=20
take the next year's expected earnings per share and calculate the =
target=20
price from the estimated EPS. If the estimated EPS is $2, the target =
price=20
would be $207 ($2 x 103.5). However, you should use this method only =
with the=20
No.1 stock in a group and only in a first-stage base."
jans=20
In a message dated 3/20/2002 11:55:41 AM Eastern Standard Time,=20
kmalm@earthlink.net writes:
<< WON's studies from 1953 to 1985 showed that the average trailing PE =
for=20
great growth stocks was 20. When they peaked, they averaged a trailing =
PE of=20
45, 2.25 the original levels. They then screened the best stocks going =
into=20
the market peak in March 2000 and found that the average PE when they =
broke=20
out was 44.8. When they peaked, they averaged a PE of 99.6, =
surprisingly, 2.2=20
times their PE on breakout. (Investor's Corner 6/9/00) His conclusion =
is that=20
this does give some range of expectation for PE expansion during the =
stock's=20
run. >>
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<BODY bgColor=3D#ffffff>
<DIV>Thought I'd add to the resource that jans provided by uploading a =
couple of=20
Investor's Corner articles on using PE for targeting sells:</DIV>
<DIV> </DIV>
<DIV>(1) Use P-E Ratio Growth To Forecast Sell Point =
(7/17/01) <A=20
href=3D"http://WallStreet-LLC.com/pub/PEtoFcstSell.jpg">http://WallStreet=
- -LLC.com/pub/PEtoFcstSell.jpg</A></DIV>
<DIV> </DIV>
<DIV>(2) Track Stock's P-E Expansion to Size Up Gains =
(6/9/00) <A=20
href=3D"http://WallStreet-LLC.com/pub/PEExpansion.jpg">http://WallStreet-=
LLC.com/pub/PEExpansion.jpg</A></DIV>
<DIV> </DIV>
<DIV>Katherine</DIV>
<BLOCKQUOTE=20
style=3D"PADDING-RIGHT: 0px; PADDING-LEFT: 5px; MARGIN-LEFT: 5px; =
BORDER-LEFT: #000000 2px solid; MARGIN-RIGHT: 0px">
<DIV style=3D"FONT: 10pt arial">----- Original Message ----- </DIV>
<DIV=20
style=3D"BACKGROUND: #e4e4e4; FONT: 10pt arial; font-color: =
black"><B>From:</B>=20
<A title=3DSpencer48@aol.com=20
href=3D"mailto:Spencer48@aol.com">Spencer48@aol.com</A> </DIV>
<DIV style=3D"FONT: 10pt arial"><B>To:</B> <A =
title=3Dcanslim@lists.xmission.com=20
=
href=3D"mailto:canslim@lists.xmission.com">canslim@lists.xmission.com</A>=
</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Sent:</B> Wednesday, March 20, 2002 =
1:30=20
PM</DIV>
<DIV style=3D"FONT: 10pt arial"><B>Subject:</B> Re: [CANSLIM] =
SYK</DIV>
<DIV><BR></DIV>Katherine:<BR><BR> Your E-mail =
on P/E=20
reminded me that WON sometimes uses the P/E ratio to <BR>guage when to =
sell=20
the stock. Here is what he said June 4, 2001 in Ask WON <BR>(on=20
investors.com) regarding P/E vis =E0 vis selling: =20
<BR> "Your sell rules are the principal guide =
on when=20
to take a profit. But <BR>sometimes we use the price/earnings ratio to =
calculate a price where you may <BR>exit a stock. Basically, you may =
start=20
considering selling when the stock's <BR>PE ratio expands 130% from =
the time=20
it broke out from a first-stage base. <BR>Example: XYZ stock's PE (or =
p/e )=20
ratio is 45 when it breaks out. Calculating <BR>a 130% expansion, you =
get a PE=20
of 103.5 [45*1.3 +original45PE]]. Next, you <BR>take the next year's =
expected=20
earnings per share and calculate the target <BR>price from the =
estimated EPS.=20
If the estimated EPS is $2, the target price <BR>would be $207 ($2 x =
103.5).=20
However, you should use this method only with the <BR>No.1 stock in a =
group=20
and only in a first-stage base."<BR><BR>jans <BR><BR><BR>In a message =
dated=20
3/20/2002 11:55:41 AM Eastern Standard Time, <BR><A=20
href=3D"mailto:kmalm@earthlink.net">kmalm@earthlink.net</A>=20
writes:<BR><BR><< WON's studies from 1953 to 1985 showed that =
the=20
average trailing PE for <BR>great growth stocks was 20. When they =
peaked, they=20
averaged a trailing PE of <BR>45, 2.25 the original levels. They then =
screened=20
the best stocks going into <BR>the market peak in March 2000 and found =
that=20
the average PE when they broke <BR>out was 44.8. When they peaked, =
they=20
averaged a PE of 99.6, surprisingly, 2.2 <BR>times their PE on =
breakout.=20
(Investor's Corner 6/9/00) His conclusion is that <BR>this does give =
some=20
range of expectation for PE expansion during the stock's <BR>run.=20
>><BR><BR>-<BR>-To subscribe/unsubscribe, email "<A=20
=
href=3D"mailto:majordomo@xmission.com">majordomo@xmission.com</A>"<BR>-In=
the=20
email body, write "subscribe canslim" or<BR>-"unsubscribe =
canslim". Do=20
not use quotes in your email.</BLOCKQUOTE></BODY></HTML>
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