Cisco Systems, Inc. (CSCO) Message Board

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Technology Stocks : Cisco Systems, Inc. (CSCO)

CSCO 77.52

-0.9%

Dec 16 3:59 PM EST

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To: Stock Farmer who wrote (52171)	4/26/2001 2:11:14 PM
From: John Malloy	Read Replies (1) of 77400

John, <<Of course, DCF is obviously flawed, because it did not predict the ability to sell CSCO at $75 last year. In the end, all models are wrong, some are merely useful.>> The DCF and DCF models are not flawed. What was flawed was our ability to forecast a year ago that sales and earnings would collapse. If we had made that forecast, DCF analysis would have given the right answer. You have to forecast future performance to find what a stock is worth. My point is that forecasting free cash flow does not forecast the cash the stock will put into your pocket when you eventually sell. Forecasting future stock price (by forecasting equity/share and the price/book ratio) does forecast what happens to your pocket. John Malloy

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