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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era
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To: Anton Posch who wrote (1612)4/27/1999 3:16:00 PM
From: porcupine --''''>  Read Replies (1) of 1722
 
Anton: "Re: 4yr. fwd. ann. cash earnings yld. How is this calculated?"

See: web.idirect.com

-- especially the part that begins with the subsection: "Forecasting Future Cash Earnings".

"Is this meant to imply that the companies at the top of the list are
better "values" at their current prices than those at the bottom?"

It is meant to imply that they are "cheap", according to the most commonly employed (though not necessarily the most meaningful) of valuation criteria: p/e -- with "cash earnings" (cash flow minus capital spending) substituted for the "net profit" figure that one finds in the newspaper's calculations of p/e.

Whether or not they are "better values", though, depends upon whether they are cheap because they are "bow-wows" (usually the case), or "bargains" that are currently being overlooked by Mr. Market. Listing stocks according to "cheapness" is easy. Figuring out whether or not they are really bargains is the difficult part. (At least it is for porc.)

For example, a few years ago the then Dow components Bethlehem Steel and Woolworth were near the top of the list. Now they're not even part of the Dow. And, Philip Morris's 4yr. projected cash earnings yield was awesome; further, unlike the first two, MO was not a hoped for turnaround. Indeed, it was one of the more prodigous cash generators of the past quarter century.

The numbers are only the beginning.
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