The Growing Public (dis)service

Your new acronym in “ ‘PEG’ Casts Tech Stocks in New Light,” Savvy Confidential, April 11] is a reflection of how hard it is to evaluate these new high-tech companies. PEG is the ratio of a company’s price-to-earnings ratio to its expected growth rate. For three to five years!

1. Do you really think that you (or anyone else) can predict any company’s earnings more than 12 months into the future? Why not reproduce the list of 12 companies (JDS Uniphase, Ciena, etc.) with your best guesser’s 12-month earnings estimate and again print the actual 12-month earnings in a year’s time (along with the estimate, of course)?

2. Anybody who ventures to estimate earnings of these newcomers more than 12 months out is really daring. Consider the variables, all of which should be factored in. Such as (but not limited to):

* New competition for similar or substitute products or services, obsoleting or obliterating a monopoly that an innovator may gain temporarily.

* Changing economic environment in the potential marketplace.

PEG is an imaginative idea, but why not go with one year’s estimated earnings’ growth (STPEG: short-term price earnings growth. Or some other more realistic yardstick.

RONALD BENKERT

Marina del Rey