>what can one expect of valuation metrics in times like these?
I think I answered this question before, when
I described my valuation approach. I have not changed
it. I use my own conservative estimate
of forward going ROE, which is closely related to
earnings growth, as a yardstick. By being conservative,
I mean, that for example, I currently use only 15%
ROE for INTC - it's average ROE for last ten years
is ~25%. I think 15% is achievable for the next
5-10 years. However, with such yardstick, INTC is still
fairly valued and not undervalued. I get expected
annual return of ~7% from the current 19.5 price. Not
a sell, not a buy. If one raised expected ROE to
20%, expected annual return would rise to ~13%.
Which is close to my buy criteria, but I doubt that
INTC will be able to continue 20% ROE times.
I do not use short term negative PEs, negative
growth, etc. for my valuations. However, I take into
account equity drop associated with losses and
I look at whether company is really losing it.
As mentioned before, I do not look at the companies
that did not show at least 15% ROE consistently for
at least 5 years. So I won't comment on certain
G&Ks that fail this measure.
Jurgis - and, yes, I remember that Thomas was not
satisfied with my measures the last time... :-))) |
