>> What is your valuation model/algorithm? <<
Home made. First I follow only companies related to my area of expertise. Then I look at sales figures, and try to project three to six quarters ahead. Lastly, I estimate a reasonable p/e ratio for the company once it stabilizes. I work all of these under relatively pessimistic projections. If after that the company still looks somewhat cheap, then I buy.
>> So do you think this is undervalued now or what number would be the cut off? <<
I had expected Apple's turnaround be further ahead by now. Since January the cutoff number has moved down to $13 or so per share.
Apple forward sales, under mild pessimistic projections, are IMHO $5 billion (I expect clones to continue eating away Mac sales).
Let's assume a 3% margin, which is common in the industry, but somewhat optimistic this chronic money loser.
Since at that point the company would have little good will left from investors, it would be trading at 10 p/e for a price of $1.5 billion.
Of course, if the turnaround succeeds, then this company could go back to $30 in no time. But people have been talking turnaround and takeover target since Sculley was fired and here we are two years later with no takeover in sight and still waiting for a turnaround. |
