So where does it get INCLUDED when QCOM is able to reinstate the $600 million of Pegaso assets?
in the same place where it was excluded. i have not looked at QCOM's filings in detail to see where this is. if Pegaso is an impaired asset which was written down on their balance sheet, then they would change the valuation there. but in any case, this is all an effect on GAAP numbers, which investors tend to like to ignore anyway because it doesn't paint the rosy earnings we get out of pro forma.
if earnings growth is projected at, say, 70 percent annually, I would attach a probability of about 10 percent, giving an expected value of earnings growth of merely 7 percent. If I use the more conservative 25 percent earnings growth estimate, however, I would attach a probability of about 80 percent, giving an expected value of the growth rate of 20 percent.
i'm not sure i follow. if a co is projected at 70%, that may be high, but it probably still has a greater likelihood of achieving 25% than a co that is projected at 25%.
in any case, when i run QCOM's numbers, i generously take all their numbers (pro forma) at face value, and even more generously assume wildly bullish growth for many years; and yet i still do not believe QCOM will outperform TIPS with 3.5% real yield.
i stated as much to gdichaz around December 5 of last year, when QCOM was at 62 bucks and i received many taunts to buy the stock and its calls. i told chaz on this thread that i expected QCOM to underperfom government bonds over the next decade. since then, QCOM has fallen about 39%, and now needs to appreciate 63% just to get back to breakeven of 62.
it is all so simple in the end: how much money does a business generate relative to its price? does it generate substantially more than a risk-free asset? if so, then maybe it's a buy. but otherwise, i keep my distance. |
