Replies to post #82502 on Value Microcaps Motherboard

[lentinman]

Deewar:

I don't know how to explain it much differently than what has already been said, but that never kept me from trying in the past, so....

From their 10K: "As of September 21, 2007, there were 18,875,000 shares of our common stock issued and outstanding and there were 61 holders of record of our common stock."

Now, we know that as of June 30th, they only had 11.2M SOS, but today isn't June 30th. Neither was yesterday or the day before. Historically, on June 30th, their PE was based on 11.2M SOS - no problem. But, that means nothing today.

You are correct to say the "past" PE is X based on 11.2M, but that is as irrelevant as to the past PE when SOS may have only been 5M or whatever.

On September 21st, the PE became based on 18.875M shares. If some site doesn't update the PE on September 21 or 22 or 23 or whenever, that doesn't change the fact that PE DID change.

"I have never reviewed a stocks worth at this so called 'present' PE - I will gauge stock value on either the trailing PE that yahoo shows - TTM"

That is correct as long as Yahoo updates the SOS to the correct number to determine TTM PE at any given moment. PE is the Price/Earnings per share (as you know). Earnings doesn't change from June 30 to September 21, but "PER SHARE" DOES CHANGE because the SHARE # changed. So, the TTM PE does indeed change on the 21st of September. Like I say, just because a site doesn't update the PE, doesn't mean it is a valid number. It isn't.

To prove my point, they could increase earnings substantially in the September quarter and you STILL would have a higher PE because next quarter is going to be based on a nearly 70% increase in SOS.

So, TTM PE should be based on EXISTING price of the stock and EXISTING earnings and EXISTING shares outstanding - updated every day. Future PE should be based on EXISTING price of the stock and EXISTING shares outstanding and FUTURE expected earnings - also updated every day.

Len

[lentinman]

Deewar:

I'm going to respond to your PM on the board so it can be read by others if interested.

It may seem like a PE (Price divided by Earnings Per Share) is fixed once the quarter ends, but that is not true. The PE changes every single day. All you have to do is just track it. Now, commonly what happens is that companies that report PE, simply write the code so that when the P changes, the PE changes with it... with no respect for what happens if the Earnings Per Share changes. Obviously, that is flawed. That is the product of being lazy. They know the P is easy to track every day, so they do it. They know that the Earnings will only change once every quarter, so they don't worry about that. BUT>>>>>>>>>>> They also know that PER SHARE (a function of SOS) can change anytime - potentially many times during a quarter. It's too much work for them to bother with trying to update the PE every time the SHARES OS change, so they generally don't bother with it until after the next 10Q.

But, just because they are lazy, and don't bother with it until the next quarterly report, doesn't change the fact that the TRUE PE is a function of TODAY'S PRICE, TODAY'S EARNINGS and TODAY'S SOS - and nothing else. That may sound like some "PRESENT PE" instead of "PAST PE", but it is both. That IS the definition of TTM PE - the most recent 12 months of earnings based on today's price and today's SOS.

Like I say, just because some company reports PE as the most recent 12 months of earnings based on today's price and YESTERDAY'S SOS, does not make it correct. It simply confirms that they are lazy.

And, if somebody wants to believe that a company has a 4PE because based on the last 10Q that is correct, and ignore a doubling of SOS in the meantime (meaning 8PE) and they invest on the basis of a 4PE because they invest in anything under a 5PE.... if somebody wants to bury their head in the sand like that, that's up to them.

Having said all that, OF COURSE, you have to look at what the new shares OS are buying you in the future. Maybe that more than makes up for it in your opinion.... but that's a function of FUTURE PE, not PAST (EXISTING) PE.

Len