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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Don Earl who wrote (11766)	1/10/2001 10:27:41 AM
From: TimbaBear	Read Replies (1) \| Respond to of 78470

Thanks for the URLs! Had put aside the list for a bit, because I've been studying up a lot on Cash Flow Analysis. Although I am comfortable with the components of the Statement of Cash Flows(SCF), and I understand that the higher the Cash From Operations(CFO) the better off the company, I am wrestling with coming up with a usable formula for converting the CFO into a valuation tool. For example a company with CFO of $90 million, with "X" amount of shares, is worth what? I understand that the time value of money has to be taken into account and that I have to discount future cash flows as part of this value hunting process. I am just uncertain what length of future(2 years, 3 years, etc.) to use and how to remove as much guessing from formula as possible. Or, if I can't remove it, what would be a conservatively prudent future estimate of revenue growth and/or CFO growth that would still allow a fair evaluation of todays value. I think I have found a good formula for discounting cash flow in an old financing book I picked up somewhere, and I have an HP12C that I use for mortgages that is capable of the same thing. But the rest is more difficult to arrive at. I've looked back at Security Analysis, and Intelligent Investor, and a host of other sources in my library but I haven't seen anything yet that specifically addresses the idea I have. I think I can only project 2 years growth for any company without really getting out there on my guesstimations so I think I'll try to work out something based on that length of time. Also, the cash from financing activities and the cash from investing activities are areas where I haven't finalized my thinking. If a company is selling widgets, then that should be the business I am evaluating and not the cash flows from elsewhere. I think those flows(even though for some companies it can be sizable) I'll just put on the side of the ledger that evaluates what they do with the profits they don't pay me(ROE, etc.). However, if they apparently put CFO to "bad" use, I will deduct accordingly from CFO and use the net for whatever formula I can come up with. Do you have any valuation formulas or methods that you care to share that are based on cash flow? Timba