‘PEG’ Casts Tech Stocks in New Light

Psst. Wanna buy a cheap tech stock?

Software maker Citrix Systems Inc. (CTXS) sells for 99 times this year’s expected earnings per share--but in the computer industry’s world of fast-growing profits, that’s not as steep as it sounds, said PaineWebber analyst Don Young.

Young began coverage of Citrix on Monday with a “buy” rating and a price forecast of $115, sending the shares up 8% even as the Nasdaq composite plunged. Citrix products work with Microsoft Corp.’s Windows NT program to help run servers, the computers used to operate corporate networks and Web sites.

Though Citrix sells for an expensive P/E, its profit a few years out is expected to grow at a robust 44% a year, Young noted. A P/E-to-growth-rate ratio of about 2 to 1 (based on the stock price before Monday’s run-up) looks attractive, given that Oracle Corp. (ORCL) has a so-called PEG rate of about 5 and many tech stocks have still higher PEGs, Young said. (See chart at left.)

Young’s call sent Fort Lauderdale, Fla.-based Citrix up $6.06 on Monday to $83.69 on Nasdaq.