What to Do with DaimlerChrysler?

Case Background: DaimlerChrysler hasn't been doing as well as its shareholders might have expected. Amid recent problems with its US operations, GM has placed a bid to buy the struggling auto giant. Another potential buyer, Magna International, Inc. (of Canada), along with an unnamed partner, has shown an interest. This latter possibility led to DaimlerChrysler stock reaching a 52-week high on Friday. Discussion: It seems unlikely that GM's offer will be accepted, as it has been considered too low. Other offers may be more plausible, but there is no certainty about whether DaimlerChrysler will end up being sold at all. One significant problem the automaker faces is the $19 billion obligation to pay long-term healthcare benefits to retired union workers. Should this figure be larger than its assets, DaimlerChrysler may have to sell.

Conclusion: The company's value is currently estimated at being between $0 and $13.7 billion. With such uncertainty, it is hard to make a decision about what to do with DaimlerChrysler stock at this time. The P/E ratio of 19.38 is only one of many factors that should be considered. Disclaimer: P/E ratios are a quick way to sort out the leaders within the same sector. Never use a P/E ratio exclusively to make an investment. Remember, a P/E ratio is measured using historical trailing earnings for the previous 12 months and does not necessarily indicate strong future earnings. P/E ratios, when used with other market value ratios, can help investors to make consistent returns and to minimize losses. Various interpretations of a particular P/E ratio are possible: 0-13 - Either the stock is undervalued or the company's earnings are thought to be in decline. 14-20 - For many companies, a P/E ratio in this range may be considered fair value. The average U.S. equity P/E ratio is usually around 14, which means it takes about 14 years for a company's stock to earn back its full purchase price. Average P/E over the entire market is a good indicator of overall market strength. 21-28 - Either the stock is overvalued or the company's earnings have increased since the last earnings figure was published. 28+ - A company whose shares have a very high P/E ratio either really does have an exceptionally rosy future or the stock may be the subject of a speculative bubble. A company with no earnings has an undefined P/E ratio. Financial information was provided by http://finance.yahoo.com (03/26/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com. All rights reserved.

Netflix: Hold or Sell?

Case Background: Netflix stock has done very well. At its IPO in 2002, it started at $8 per share (split-adjusted). By the fourth quarter of 2003, it had enjoyed exponential growth. In fact, its upward trend has been consistent for years. The company's idea of having movies available online, and being able to order and return movies by mail, has been a very popular strategy that has led to enormous success for Netflix. However, any great idea is likely to bring competition, which has certainly been the case as Blockbuster and others have entered the picture. Discussion: True, Netflix stock has been performing well. But at what point should the astute investor discern indications that it's time to sell? There are, in fact, many signs that stock-savvy shareholders have noted, which indicate that it may be time to move on. These include several declines which, when charted, show a trough.

Conclusion: The P/E ratio of Netflix currently stands at 29.65. This information, combined with what is noted above, may lead one to conclude that now is a good time to sell. However, it's important to take everything into account. Some would still say that the company, which has shown good performance and perseverance, will rebound from its current setbacks. Disclaimer: P/E ratios are a quick way to sort out the leaders within the same sector. Never use a P/E ratio exclusively to make an investment. Remember, a P/E ratio is measured using historical trailing earnings for the previous 12 months and does not necessarily indicate strong future earnings. P/E ratios, when used with other market value ratios, can help investors to make consistent returns and to minimize losses. Various interpretations of a particular P/E ratio are possible: 0-13 - Either the stock is undervalued or the company's earnings are thought to be in decline. 14-20 - For many companies, a P/E ratio in this range may be considered fair value. The average U.S. equity P/E ratio is usually around 14, which means it takes about 14 years for a company's stock to earn back its full purchase price. Average P/E over the entire market is a good indicator of overall market strength. 21-28 - Either the stock is overvalued or the company's earnings have increased since the last earnings figure was published. 28+ - A company whose shares have a very high P/E ratio either really does have an exceptionally rosy future or the stock may be the subject of a speculative bubble. A company with no earnings has an undefined P/E ratio. Financial information was provided by http://finance.yahoo.com (03/16/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com. All rights reserved.

Is AMD Losing the Processor War with Intel?

Case Background: Having recently fallen to a new 52-week low in morning trading, it looks like Advanced Micro Devices will miss its first-quarter target of $1.6 billion to $1.7 billion. The burgeoning company's problems originated from a product line perceived to be out of date, resulting in a reluctance on the part of investors to keep faith. AMD shares fell 24 cents to $13.94 in afternoon trading. Its PE ratio is currently N/A. Discussion: A product line in need of refinement is far from being AMD's only problem. Its biggest obstacle is the gargantuan Intel Corp., whose size, resources, and name recognition have proved to be very difficult to combat. Intel shares are currently just above $19; the company's PE ratio stands at 22.27.

Conclusion: AMD is by no means a lost cause. However, it is currently experiencing a negative momentum from the combination of Intel's strong competition, investor shyness, and profit shortfalls. The wise investor will examine all the evidence and consider carefully whether this company represents a great opportunity at shares $5 lower than those of Intel. Disclaimer: P/E ratios are a quick way to sort out the leaders within the same sector. Never use a P/E ratio exclusively to make an investment. Remember, a P/E ratio is measured using historical trailing earnings for the previous 12 months and does not necessarily indicate strong future earnings. P/E ratios, when used with other market value ratios, can help investors to make consistent returns and to minimize losses. Various interpretations of a particular P/E ratio are possible: 0-13 - Either the stock is undervalued or the company's earnings are thought to be in decline. 14-20 - For many companies, a P/E ratio in this range may be considered fair value. The average U.S. equity P/E ratio is usually around 14, which means it takes about 14 years for a company's stock to earn back its full purchase price. Average P/E over the entire market is a good indicator of overall market strength. 21-28 - Either the stock is overvalued or the company's earnings have increased since the last earnings figure was published. 28+ - A company whose shares have a very high P/E ratio either really does have an exceptionally rosy future or the stock may be the subject of a speculative bubble. A company with no earnings has an undefined P/E ratio. Financial information was provided by http://finance.yahoo.com (03/05/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com.All rights reserved.