I briefly read through your analysis, and it appears as if you are basing your analysis on unreconciled earnings, which is analogous to building a structure on a weak foundation. MSFT earnings, for instance, are subject to significant deferrals, reserves, and mispriced contingent liabilities. Dell and Cisco, happen to use the similar methods. In order to use capitalized earnings to ascertain a credible present value for a company, you must first ascertain what those earnings actually are, the sustainability of those earnings, and any changes in equity capital equivalents that have not been reported in the financial statements. In order to accomplish that, you may have to use considerably more complex reconciliation tools/approaches than it appears you have applied. The pure valuation portion is as simple as DCF or NPV, but you need to ensure that you are discounting the proper numbers to begin with.
Keeping your intrinsic value idealogy in mind, I invite you to read the Case Against Earnings at rcmfinancial.com
Afterwards, I welcome you to debate the relative merits of the respective approaches to "realistic" valuation. |
