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Strategies & Market Trends : Gorilla and King Portfolio Candidates
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To: Uncle Frank who wrote (49264)11/29/2001 3:58:23 PM
From: Thomas Mercer-Hursh  Read Replies (1) of 54805
 
your suggestion that we add in Depreciation & amortization and subtract purchases of property & equipment would seem to favor companies that don't find it necessary to add infrastructure to support anticipated growth. I'm not sure this is a reasonable way to evaluate growth companies.

Why not? Isn't this one of the reasons that a software company can be such a short term cash cow by comparison with a hardware company? If the company has high growth potential, plowing that money back in will still produce high growth, potentially leading to a time when less investment is required. This is simply another example where one can't simply use any number on its own without considering where the company is in the TALC and such.
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