True valuation [LWN.net]

True valuation

Posted Nov 4, 2003 20:20 UTC (Tue) by error27 (subscriber, #8346)
In reply to: True valuation by freeio
Parent article: On Novell's acquisition of SUSE

RHAT stock price has doubled in the last 3 months because <some financial firm> rated their stock as a "buy". Red Hat make 3 times as much revenue as Suse. Suse has had lay-offs and financial troubles in the past. RedHat made it through the past couple years pretty well compared to most tech companies.

I think these things explain the differences in the prices.

(Log in to post comments)

True valuation

Posted Nov 5, 2003 0:13 UTC (Wed) by vmole (subscriber, #111) [Link]

Let's see, based on the number in the LWN article above (very roughly, picking
specific values to make the numbers come out even, do the variations
yourself!):

SUSE: P/E = 210/35 = 6 - about right, maybe a bit of bargain.

RH: P/E = 2400/(35*4) = 17 - Woah!

Looks like a good time to get out of Red Hat stock.

(Which *should* have nothing to do with the success of the company,
unless they get more hung up on maintaining the P/E than on long term
profitabilty.)

Re: True valuation

Posted Nov 5, 2003 2:13 UTC (Wed) by larryr (guest, #4030) [Link]

E in P/E is earnings, not revenue, and a P/E of 17 is not high.
And RHAT P/E is a lot higher than 17.

Larry