Forum Archive Index - July 2000

["Warner Lamb" <cloud9@i4free.co.nz>]

Yes Brian, certainly used as in indication but mostly used in conjuction
with earnings growth as you say. AIRNZ does look ridiculously cheap even if
short term prospects dont look so great. I have AIRNZ on my med-long term
recovery list. It is also at a discount to all analysis valuations. Fuel
costs being the biggy but they are hedged against some of this. And your
opposite ex of BCH.....looks overpriced, with RMG in the picture I would
have to agree.
For an example taken from my previous post. ADV has a PE of 31 based on FY
31/3/00 earnings of 4.87m. If they increase earnings to 9.74m (100%) then
their PE would halve to 15-16. You can see that it is easier for a coy to
add 4.87m to earnings than say AIRNZ to add 100% to 346m. Therefore growth
companies can quickly reduce high PEs with solid growth like BCH has done in
the past and the coy keeps getting a premium...One day as the coy matures,
that gets harder and harder to do. Its the same theory as in Economics
called the "catch up" theory which can be likened to Japan or Germanys rise
since 1950.


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