Craig, Several things are in my model that are not present here, including beta, R2, price relative to market valuation, market growth, quality of earnings, etc. Basically, all of these relate tot he fact that a co. is not the sum of its future eps, but also the risk of achieving those future eps. For example, Dell may grow at 25% and FE at 10%, but GE is in much more stable businesses and is much more likely to hit its numbers over the long haul than a co. in the dying pc market. (Both have fairly low quality of eps) So you have to discount the risk inherent in owning a speculative company vs that of owning a blue chip.
I couldn't plug numbers into this model as it does not differentiate between the risk in Dell and in GE. |
