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Strategies & Market Trends : Professional Equity Analysis - the Pursuit of True Value

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To: John Langston who wrote (52)	1/30/1997 6:20:00 PM
From: Reginald Middleton	of 102

Before continuing with our MSFT LBO excersise, let's see how our shareware Equity analysis software is doing with its numbers. They actaully look very interesting: As of 4:56 PM January 30, 1997 MSFT % Change: 20.03% 5 yr. Earnings Growth: 55.50% Simplified Rate of Value Creation: 32.17% Sustainable Growth: 67.50% Initial Quote: $84.25 Current Quote:$101.13 Cash Flow Valuation: $192.94 PE Valuation: $288.50 PE Valuation Relative to Market: $202.96 Feb 100 Call Fair Value: $3.00 Feb 100 Put Fair Value: $1.46 INTC % Change:5.26% (in about a week) 5 yr. Earnings Growth: 22.50% Simplified Rate of Value Creation: 8.13% Sustainable Growth:29.81% Initial Quote: $152.13 Current Quote:$160.13 Cash Flow Valuation: $304.52 PE Valuation:$167.89 PE Valuation Relative to Market: $$135.28 Feb 100 Call Fair Value: $4.42 Feb 100 Put Fair Value: $4.78 INTC % Change:-2.74% (in 5 days) 5 yr. Earnings Growth:69.00% Simplified Rate of Value Creation: 6.64% Sustainable Growth:25.96% Initial Quote: $41.00 Current Quote:$39.88 Cash Flow Valuation:$36.71 PE Valuation:$286.97 PE Valuation Relative to Market:$148.01 Feb 100 Call Fair Value:$3.00 Feb 100 Put Fair Value:$1.46 From the looks of things, it seems as if the model and this market are proving my allegeationin the introductory post 100% correct. notice how the share prices are gravtitating toiwards their cash flow valuations and "true value growth" and seem to be ignoring earnigns growth and PE valuations. since this is a small study of three stocks over a VERY short period of time, please consider this eveidence anecdotal at best, and non-scientific. But it does serve to illustrate my earlier points. If one were to purchase the calls and puts at the fair vlaues indicated (or close to them) one could have "theoretically" profited by nearly 50 percent in the one-two week period covered. AGAIN, this is anecdotal, over a short and biased (bullish) period and over a short, not statisticcaly valid tiem period. I plan to make this thread the most educationla discussion thread on SI, and possibly onthe Internet, not withstanding my site of course. To download the model, proceed to rcmfinancial.com and follow the directions. Now, back to our enterprise level LBO of MSFT using the New Media Financial Knowledgeware.

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