Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: valueminded who wrote (11936)	1/22/2001 10:32:44 PM
From: Q.	Read Replies (2) \| Respond to of 78632

re. out-of-favor stocks, DaimlerChrysler (DAJ) is getting bad press every place you turn. It almost seems like a feeding frenzy. The chart shows it, too: finance.yahoo.com re. DAJ's valuation, here's two ways of looking at it: (1) yield: DAJ 6.9% Fiat 2.3% Volkswagen 1.3% Porsche 0.4% F 4.5% GM 3.6% (2) price multiple (enterprise value / EBITDA). For that, here's an excerpt from this week's Barron's cover story about BMW: ... that puts BMW's 2001 price/earnings ratio around 13. But few analysts or big investors regard P/Es as a good measure of value when it comes to European corporations, because accounting standards are rather loose and bottom-line figures can thus be "adjusted," sometimes quite liberally. Instead, they look at the enterprise value ratio, or EVR, which is enterprise value (market capitalization plus debt, minus cash) divided by EBITDA (earnings before interest, taxes, depreciation and amortization). By this standard, BMW is not the cheapest stock around, but neither is it very expensive. Its 2001 EVR of about 4 compares with 3 for VW, 5.3 for Fiat, 3 for DaimlerChrysler and 7.1 for Porsche. Because they are focused on the premium segment of the market, BMW and Porsche typically sport higher EVRs than other carmakers. Looking at that, I'm not sure what to think. It has the same multiple as VW. I tried to compute the same ratio for F and GM, although I only had TTM values for EBITDA, not 2001 values as for the European makers in the article. I calculated the trailing EVR as 7.1 for GM and 17.8 for F (where the difference between the latter two is attributable in part to the greater leverage at F as compared to GM). I wonder if it's yet at a point where you can buy one of the world's greatest brands at a discount and get Chrysler for less than nothing on top of that. Any opinions?