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Technology Stocks : Cisco Systems, Inc. (CSCO) -- Ignore unavailable to you. Want to Upgrade?

To: John Malloy who wrote (52168)	4/26/2001 12:03:50 PM
From: Stock Farmer	Read Replies (2) \| Respond to of 77400

Hi John - Why discount free cash flow? Absolutely, for growth stock the only value is what Joe Futureguy is going to pay for the pleasure of taking the certificate from you. You could assume you will be lucky and find Futureguy to be clueless but wealthy, and willing to take it at a price that will be higher, simply because you won't sell it for less than you bought it for and it is in demand. This carries with it a certain set of logical implications which require supreme arrogance or supreme humiliation. I prefer not to go there. Alternately, you could assume Futureguy will be rational and attempt to put yourself in Futureguy's shoes. This means constructing a set of reasoning that leads to a fair value for FutureGuy and a fair value for you, separated only by time. A long enough DCF view is ONE such model. You could use p/b or p/e or p/s forecasting techniques. But any such model requires you to answer "how can b/e/s get to become that number" which requires some sort of cash-flow/business growth analysis. Of course, DCF is obviously flawed, because it did not predict the ability to sell CSCO at $75 last year. In the end, all models are wrong, some are merely useful. John.