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Gold/Mining/Energy : Strictly: Drilling and oil-field services
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To: Chuzzlewit who wrote (21230)5/3/1998 5:26:00 PM
From: jbe  Read Replies (2) of 95453
 
Thread, I am directing this question about evaluation to Chuzzlewit, since he is a financial analyst (and a good one), but it is for anyone who cares to answer.

In my view, Diamond H's dismissive attitude towards the market's presently lofty p/e's is justified, in one sense at least. Many knowledgeable people do not think that p/e's (actual or projected) are the best way to evaluate a company.

Following O'Shaughnessy, it has become fashionable to use the price/sales ratio as the preferred method of judging a company's real value. I personally favor another method -- price to free cashflow. And there are a host of other methods out there.

I see this as an important question, because one and the same company can appear undervalued or overvalued or fairly valued, depending on what measure one relies on.

Of course, none of this may make any difference in the long run, as long as the mass of people care more about chasing will o'the wisps than about true value! (Harrumph, harrumph!)

jbe
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