Hi James!
"...But when one starts saying a stock is attractive because it trades at 2 times net-net or 3 times net-net, or start thinking net-net is the same as book value you're in dangerous territory. That was what I was responding to when I posted last night...."
I know you weren't talking to me when you posted this, but I want to set the record straight for the board.
If I state that I like a stock and that it is selling for 2 or 3 times NetNet....I am not saying that that is WHY I like the stock. I will like the company for the net profitability, size, scope, market prospects, longevity, cleaness and clarity of its reports, etc., etc., etc. I may list the price to NetNet ratio simply to indicate that I think it is cheap.
There is no way that I think NetNet is the same as book, it is better! (Especially when combined with Free Cash Flow).
"Book Value" attempts to give a value to past undistributed profitability, but to me it is a bogus paradigm. It gives me no flavor of the zeal or ambition of management TODAY. There is no metric that really gives me that sense of management's "fire for the business", so I develop my own.
Timba |
