Motorola Acquires Terayon

Case Background: Motorola is about to acquire Terayon Communication System, Inc. for something like $140 million. Upon this purchase, Motorola will pay cash for all of Terayon's common stock, at $1.80 per share. Discussion: Terayon is a manufacturer of video processing products, which, by optimizing bandwidth, allow viewers access to content of regional or local interest. The acquisition of this company will give Motorola various digital ad insertion and channel-optimizing technologies.

Conclusion: Motorola's P/E ratio currently stands at 12.32. This, along with considerations such as Motorola's current market position and other financial data, should be taken into account before deciding whether to buy or sell Motorola stock. 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 (05/10/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com. All rights reserved.

Home Depot Inc.

Case Background: Three private equity firms have joined together in a $10B deal to purchase the supply division of Home Depot Inc. The sale price was lower than analysts and investors had expected. The company offered no comment on its decision, but it is thought that the move is designed to appeal to shareholders looking for positive action. Discussion: It seems that recent troubles in the housing market are to blame for the less-than-expected price of the sale. It is because of this, in fact, that Home Depot has backed away from diversifying into supply, instead choosing to return to the basics of retailing.

Conclusion: Some have speculated that Home Depot's future expansion may not rival its past growth. However, the future is still unwritten, and the company appears to be solid. Its P/E ratio currently stands at 14.48. This and other available information should be used before making a decision. 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 (07/03/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com. All rights reserved.

The Buyout of Sallie Mae

Case Background: Sallie Mae has been the world's largest originator of student loans for some time. However, there have been some problems with school officials referring students toward specific lenders. Nevertheless, this has not stopped J.C. Flowers and the firm of Friedman, Fleischer, and Lowe to buy them out in a $25 billion deal. Discussion: After the buyout (which was at $60 per share) was announced, Sallie Mae stocks increased 18 percent. Top management has indicated that there will be no difference in the way student loans are processed. One concern, though, is that there may be increased regulation from lawmakers--a potential problem for this industry. The investors who purchased Sallie Mae are not overly concerned about this, however, as the stock price and potential for the company seemed irresistible.

Conclusion: Sallie Mae's P/E ratio currently stands at 21.07. This ratio, as well as other relevant financial information, should be taken into account before making a decision to purchase stock in this (or any) company. 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 (04/16/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com. All rights reserved.

Is Best Buy the Best Buy?

Case Background: Best Buy has been able to capitalize on a key component of retail success--customer service--which has vaulted it ahead of competitors such as Circuit City, Costco, and Fry's. This has translated to a fourth quarter-gain of 18 percent. Discussion: The attention to customer needs is noticeable from the time one enters a Best Buy store. A friendly greeting is followed by a knowledgeable sales associate offering assistance. If the assistance is declined, the sales rep will not become pushy. This stands in contrast to other stores, where it is sometimes the case that employees are either unavailable, lacking in knowledge, or not well-trained. Customer loyalty is huge in the retail industry, and Best Buy's increasing profit demonstrates this.

Conclusion: Best Buy's current P/E ratio is 19.04, compared to 22.86 for Circuit City, one of its main competitors. In light of its focus on customer service, with earnings to back up the value of this, it may be a good time to invest. 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 (04/06/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com. All rights reserved.

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.

What's Next for America's Largest Bank?

Case Background: Will Citigroup, America's largest banking institution, really take over Nikko Cordial Corp.? Yes, according to a variety of Japanese publictions, including the Asahi and Yomiuri newspapers, as well as the Mainichi, Nikkei and Sankei. To avoid being delisted from the Japanese stock exchange, the embattled brokerage firm is hoping to elicit the assistance necessary to improving operations. What's in it for Citigroup? The acquisition of Nikko Cordial will increase Citigroup's Asian presence. If it can turn Nikko Cordial around, the potential gain is tremendous. Discussion: The deal is estimated to cost around 300 billion yen ($2.48 billion USD). This is almost chump change to a giant like Citigroup. But is it a wise move? At this point, it's difficult to say. While Citigroup could absorb a substantial loss if things didn't go as hoped, the same may not be said of all its shareholders. Citigroup's P/E ratio is currently at a reasonable 12.48, but this must, as always, be weighed against other factors.

Conclusion: What should the wise investor do? Investing in Citigroup may be a good idea at this point--a chance to get in on the ground floor of its Asian expansion opportunity. However, such a strategy should be weighed carefully, considering as many factors involved as is practical. 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 02/24/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com. All rights reserved.

M’m! M’m! Good Time to Invest in Campbell’s?

Case Background: Everyone knows that soup is good food. But it may be time to think of it as a good stock investment, considering brand leader Campbell’s recent run. Campbell executives have, until recently, been reluctant to comment directly about the success of its new lower-sodium soup products, saying it was too early to tell about them. Company president Douglas R. Conant noted Friday, however, that this line has been increasing soup sales overall. Conant also pointed out that even if low-sodium soup sales were not increasing, they would nevertheless help the company. This is due to the product line’s having both higher prices and greater margins of profit.

Discussion: The market’s response was quite favorable. Closing at $42.29 on the New York Stock Exchange, Campbell shares were up almost 7 percent, reaching $2.71. This represents the highest share value in the past 52 weeks. For the quarter ended January 29, earnings were 72 cents a share, up from 61 cents a share from the previous quarter. In dollar amounts, this works out to $285 million, up from $254 million. Despite the good news, total sales were actually down 1 percent. Campbell’s PE stands at 23.06, compared with General Mills at 18.79; Heinz at 23.63; and Kraft at 18.90. Conclusion: There can be no doubt that Campbell is a rock-solid fixture in the food industry. However, the soup industry in general has experienced a slight downturn, as noted above. Still, company officials expect prosperous 2007 fiscal year, with forecasts of earnings per share growth to be in the range of 10 percent to 12 percent range; this is up from the previous forecast of 5 percent to 7 percent. 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 (01/16/2007) This investment article was edited by http://www.proof-reading.com; copyright © 2006 PE-Ratio.com. All rights reserved.