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Politics : Ask Michael Burke
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To: Don Lloyd who wrote (67780)9/16/1999 11:04:00 AM
From: Freedom Fighter  Read Replies (1) of 132070
 
Don,

Off the top of my head I don't. I vaguely remember seeing 6% or so a few times but I can't recall who it was. Most likely it was a techie. Usually if the options grants are high, my analysis of the situation stops immediately because the earnings overstatement is too high to be acceptable the way I calculate the true expenses.

I don't know if you are familiar with those long term dividend discount models that are popular. But they have a stage one (and sometimes stage two) growth rate and a long term terminal growth rate in the calculations. The long term terminal growth rate assumption is usually somewhere in the area of nominal GDP growth.

If you knock 3%-5% off the terminal growth rate due to dilution it has an enormous impact on the resulting valuation.

Wayne
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