Steve Zito, Wharton School BS Econ, MS Fin, HTML Writers Guild
uses economic and technical analysis to forecast the direction of the stock market. The views in this newsletter are opinions only, and should not be solely relied on for your investment decisions.
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NASDAQ COMPOSITE
INDEX closed 1291.40

Sept. 16, 2002. Price to Sales Ratios

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Go To Page 2 Sept. 13, Nasdaq Composite closed at 1291.40 +11.72. Nasdaq fell 3.90 (-0.3%) since my Sept. 9 page. Price to Sales (PSR) Analysis- Intel, AMD, Nvidia, Microsoft. With earnings in recession, Price to Earnings (P/E) is not useful to compare tech stocks. Better to use PSR, Price to Sales ratio, which is annual sales divided into firm's market value. At bottoms relative value is found comparing sales into market value ratios. PSR is the current dollar price the stock market is willing to pay for $1.00 of annual revenue. In calculating market value, use the current price times shares issued and outstanding, and annual revenues are the sum of the previous 4 quarterly revenues from SEC 10-K filings. Is Intel a stock value compared to competitors AMD, and its Santa Clara neighbor, Nvidia? Calculations show high PSR for Intel at 4.04 compared to 0.74 for AMD and 0.85 for Nvidia. Intel closed at 16.03. EDGAR Online shows 6,703 million shares on February 22, 2002 for market value Sept. 13 of $107,449,000,000. Taking this market value divided by previous 4 quarters gross Intel revenues $26,628,000,000, the Price to Sales Ratio for Intel works out to 4.04. AMD closed at 7.21 with 332.4 million shares of common March 7, 2002 for a market value Sept. 13 of $2,396,600,000 divided by 4 quarters gross AMD revenues of $3,220,000,000, so a Price to Sales Ratio for AMD works out to 0.74. Nvidia closed at 10.57 with 151.3 million shares of common March 29, 2002 giving NVDA market value Sept. 13 of $1,599,200,000 divided by previous 4 quarters gross revenues of $1,878,500,000, a Price to Sales Ratio for NVDA works out to 0.85. With P/E ratios non-sensical, the PSR analysis favors AMD. Full text available. Microsoft closed 47.91 with 5,378.7 million shares of common July 31, 2002 for a market value Sept. 13 of $257,693,500,000 divided by the previous 4 quarters gross revenues of $28,365,000,000, the Price to Sales Ratio works out to 9.08. Compare Microsoft and Nvidia, its X-box chipset vendor. Both stocks traded over 70 in January. Sept. 13, Microsoft closed at 4 1/2 times the price of NVDA, and its 9.08 PSR is 10.68 times the 0.85 PSR of Nvidia. Critics claim comparisons of Microsoft, a software provider, to a chip stock is not valid. How about Microsoft's competitor, Oracle at 9.73 with 5,433.2 million shares of common July 15, 2002 for a market value on Sept. 13 of $52,865,000,000 divided by previous four quarters gross revenues of $9,673,000,000, Oracle's Price to Sales Ratio comes to 5.47. That makes Oracle a steal compared to Microsoft, but both stocks are grossly overvalued. The goal is to find great tech companies selling for very low Price to Sales (PSR) ratios. My subscribers bought Elan Plc (ELN) at 1.69 as it has the lowest PSR of all the stocks in Sept. 15 newsletter at PSR 0.48. Subscribers to my Newsletters read this first Sept. 15. SPECIAL. Get 2 to 3 issues a week for 6 months for only $50. My 150 newsletters published in 2001, please visit my Site Directory.
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