China Digital TV valuation still reasonable based on growth rate
Given the assumptions above , STV’s earnings per share would be expected to grow from 44 cents in 2007 to 75 cents in 2008, which implies earnings growth of 70.5 percent on revenue growth of 65 percent. ... Google’s stock currently trades at about 1.2 times its growth rate for 2008 EPS. If we ascribe the same multiple to STV shares, then based on the estimates above, we can easily see STV trading over $63 per share (70.5% x 1.2 x $0.75). This is sort of a mid-range price target, but I would argue that China Digital TV deserves to trade at a premium valuation to Google shares because it has a much faster growth rate and the general industry is also growing much faster. If we stretch the valuation for STV to 1.5 times the growth rate, the stock could trade up to $79 per share. The stock could perhaps even go as high as two times its growth rate before it starts to look overvalued, and that would price the shares at $105.Do I buy these targets? I can't say I do or don't. But at least there's a line of reasoning and an analysis of numbers by this blogger without an overemphasis on P/E.
No comments:
Post a Comment