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Strategies & Market Trends : Value Investing
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To: Paul Senior who wrote (44467)9/21/2011 7:24:14 PM
From: J Mako  Read Replies (1) of 78476
 
More thoughts on GLW.

I read the transcript of the most recent conference call. CFO hinted returning cash to investors (buyback?) was now on the board's agendas.

I gave it some more thoughts. GLW's effective tax rate in 2010 was only 15%. GLW has a lot of offshore equity earnings. So the GAAP earning figure isn't real. To bring the money back, correct me if I'm wrong, GLW needs to pay for the difference in tax. And of course, some of those retained earnings will be plow back into Capex locally without incurring additional tax. I did a back of envelope calculation. Assuming GLW will bring back distributable cash back onshore after local capex, it's trailing P/E will be more like 8.5x.

Now, thinking about it, there is a simply way to look at it: we can simply use EV/EBIT to bypass this taxation mess.

I suppose large-caps like MSFT, GOOG, CSCO, etc with lots of cash all have this issue.
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