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Technology Stocks : Y2K (Year 2000) Stocks: An Investment Discussion
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To: P. Ramamoorthy who wrote (7583)11/5/1997 6:54:00 PM
From: CalculatedRisk  Read Replies (2) of 13949
 
Ramamoorthy, discounted FCF is the typical way to value a stock. A short-cut for Y2K companies is as follows:

1) Cash
2) Earnings for 1998 - discounted 1 year.
3) Earnings for 1999 - discounted 2 years.
4) Value of Company Jan 2000 - discounted 2 years.

Let us use IMRS as an example (I have no position).
Cash = $30M
1998 projected earnings $0.69 * 23.5M shares = $16.2M (see note 1)
1999 projected earnings $0.69 * 23.5M shares = $16.2M
Jan 2000 value $50M (note 2)

Discounted values: (note 3)
Cash = $30M
1998 = $15M
1999 = $14M
2000 = $42M
Value of IMRS today = $4.35 per share.

Note 1: from Zacks. Plug in better estimates if you have them.
Note 2: Consulting companies usually trade with a PSR of 1 or 2, I estimated that revenues in 2000 will return to the $25M level - plug in whatever revenue you believe, since I don't follow this Company.
Note 3: Used 8% discount rate.

Hope this helps with your investing,
Regards, Bill
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