SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Strategies & Market Trends : Value Investing
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: armi who wrote (40838)12/28/2010 12:50:25 AM
From: Jurgis Bekepuris1 Recommendation  Read Replies (1) of 78844
 
Sorry armi, but you just cannot put a multiplier on a total future cash flow. The reason there is a multiplier on a current cash flow is that the multiplier is an estimate for the future cash flow. In essence the market is saying: "your ice cream machine produced $10 this year, so we believe it will produce something like 8 x $10 (discounted) through eternity". The 8 multiplier is just an estimate for all the future cash flows discounted.

You could put a multiplier on the all future 'excess cash' discounted, since it is different from "all future FCF". However, such multiplier has to be very different from a multiplier that market puts on this year's FCF. Again, assuming $10 in this year's FCF and let's say $20 in all future 'excess cash' discounted, why do you think there should be the same multiplier on both? And if it's a different multiplier, how do you know it's a "good" multiplier? IMHO there is almost no intuitive meaning for your "all future 'excess cash' discounted" number, so it's very hard to say what multiplier is good for it.

I pretty much remain with my opinion that you are going in direction that will not yield useful results. Either use regular DCF or use something like Buffettology calculations, but what you are doing now IMO is not productive.

Best luck though. :)
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News