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Technology Stocks : Hummingbird Comm. (HUMC)
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To: Dr. J who wrote (1581)4/29/1998 11:45:00 PM
From: Hassan Lakhani   of 2018
 
I think Paul's use of cash flow is OK if he is assuming that there will not be any cash flow after five years time. I think this is what he was assuming. Also, no one mentioned the fact that those future cash flows should be discounted. Obviously having $20 million dollars five years from now is not worth the same as having $20 million dollars today. Since we are valuing the company today, we should take the value of those cash flows in today's dollars. This will work out to be less than $150 million.

For the record, I also sold my stake in HUM. The sudden drop in revenue growth eliminated my confidence in the future of HUM's share price. When a company is growing at 30-40 per cent per year, you can call it undervalued when it's PE Ratio is 15-20. But, when growth falls to 15 per cent, and the company seems to be pinning all its future hopes on a business it only really got involved in a few months ago, I don't think HUM is so undervalued with a PE of 15-20. Just my two cents.

Good luck to all those still in HUM.

Hassan
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