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Sourced in part from Harvard Business Review May - June 1988. More detailed
explanation is attached.
V = EPS(8.5 + 2g)4.4/Yaaa
V = company's intrinisc value
EPS = company's last 12-month earnings per share
g = company's long-term earnings growth estimate
Yaaa = is the yield on AAA corporate bonds.
8.5 represents the appropriate P-E ratio for a no-growth company as proposed
by Graham
4.4 was the average yield of high-grade corporate bonds in 1962
To apply this approach to a buy-sell decision, each company's relative
Graham value (RGV) can be determined by dividing the stock's intrinsic value
V by its current price P.
RGV = V/P
An RGV of less than one indicates an overavalued stock, while an RGV of
greater than one indicates an undervalued stock.
bobr
----- Original Message -----
From: "Don Ewers" <dbewers@xxxxxxxxxxxxx>
To: "Real Traders" <realtraders@xxxxxxxxxxxxxxx>
Sent: Sunday, March 11, 2001 5:37 AM
Subject: [RT] Valuation - Tech
> Avoiding trying to figure when and where the NASDAQ will potentially turn
> for the moment, what is the criteria one should use to invest again in
> technology.
>
> If possible let us also avoid an economic turn which understandably is a
big
> part of the formula as is "product", market potential and so on. It is
> certainly not just price (XYZ has dropped below $20).
>
> Past earning performance, price to sales, price to book . . . . what does
> the "institutional" investor use to decide when to step in and "invest"
once
> again in this sector (or should I say carnage) assuming their investment
> horizon extends out for 1-2 years maybe more.
>
> Is there anyone on the list that knows what they look at (understanding
> there may be better areas to invest in such as energy, value companies
etc.
> right now).
>
> Bottom line when will the Intel's, Sun Micro's, Cisco's, Microsoft's, LSI
> Logic, ADC Telecommunications have "value"? Thoughts anyone. Does this
> really represent a significant opportunity today for one who has so far
> avoided this massive drop, as some are touting?
>
> The charts should tell us when to invest and that may be the ultimate
> answer, but for the moment is there any "fundamental's" one could look at
> also.
> don ewers
>
>
>
>
> To unsubscribe from this group, send an email to:
> realtraders-unsubscribe@xxxxxxxxxxxxxxx
>
>
>
> Your use of Yahoo! Groups is subject to http://docs.yahoo.com/info/terms/
>
>
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Attachment:
Description: "RGV.rtf"
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