RE: "This is a psuedo investment company now. Investment companies trade at lower multiples to earnings for good reasons"
Tim,
[Edit: How low do you think CMGI's market cap should be? ] CMGI's market cap is now $18.5B for making $225MM in earnings.
Did you know Intel's Capital group was in the top 3 as far as VC funds go?
What market cap would you assign Intel Capital?
Check CMGI out, and let's compare:
$66.25 (CMGI) $18.5B market cap
$18.5B / 66.25 = 300MM O.S.
EPS = E/S, E = 300MM * .74 = $225M (last year CMGI made on their investments as income, realized declared gains)
So, an income of $225MM in investment income yields a market cap of $18.5B. That was CMGI, now let's look at INTC:
If Intel made $2B (i.e. realized from their cash & securities) every year on Intel Capital (Intel has about $11B in cash & around $11B in securities), then a proportional market cap would be: $160B. And, assuming CMGI rates:
~$400B - $160B = $240B market cap for operations.
$400B ---> $120/sh (for entire company)
$240B ---> $72/sh (for operations)
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$120 - $72 = $48/share Intel Capital
2001 $72 * 1.35 + $48
2001 $72 * 1.35 * 1.35 + $48 = $180
240/400 = 60% = market cap of operational side
60% * $57.76 (PE) = $35 PE from ops, which is a PEG of one, if operation grows at 35%. PEG = 2, if operation grows at 17.5%, or PEG = 3 if operation grows at 11.6%.
GV would like a PEG of 1 (I think), which means operations would need to grow by 35%. I think INTC might have a PEG more like 1.5, so that would be ~23%.
Amy J Please double check my #s. I've got to go! |
