Correlating Innovation and Share Prices

In the last article on the P/E ratio vs. Growth for some of the largest companies, the question of PEG came up. PEG is the P/E over Growth and it’s a good way to index valuation relative to growth. Usually Growth is measured as the forward twelve months consensus and a PEG of 1 is, as a rule of thumb, considered “fair value”. However, forward growth is based on possibly inaccurate analyst consensus. If we instead look at historic growth, we have some actual performance to evaluate. Let’s call this PEhG for P/E over historic Growth.

The following chart shows 30 large cap technology companies[1] and their five-year compound EPS growth vs. their current P/E multiples. If we draw a line at the PEhG of 1, i.e. when the P/E ratio is equal to the historic growth rate and split the pack into PEhG > 1 (overvalued)[2] and PehG < 1 (undervalued), we have the following split:

The chart makes for an interesting Continue reading “Correlating Innovation and Share Prices”

WebOS: HP, and HP Only. QNX: RIM and RIM Only

WebOS: HP, and HP Only.

With the launch of RIM’s tablet computer based on QNX and HP’s confirmation that WebOS will not be licensed, we have

  • Apple the largest tablet and music player company,
  • HP the largest PC company,
  • RIM the largest smartphone company in the US, and
  • Nokia largest smartphone company in the world

avoiding Android.

These are the companies which today are profitable and enjoy large market shares. Why did they choose integrated (aka “closed”) software with their hardware vs. the modular (aka “open”) approach offered by Google and Microsoft?

See also: asymco | Android’s Pursuit of the Biggest Losers