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

To: Jurgis Bekepuris who wrote (1340)	12/7/2010 10:00:24 AM
From: bruwin	Read Replies (1) \| Respond to of 4719

Well, if NFLX was overpriced when it was at +/-$50 then the metrics used to conclude that, at that stage, missed out on the opportunity of a potential Capital Gain of 300% over a 15 month period. I don’t know about you, and others, but, personally, I would have been satisfied with half of that, viz.150%, over the same period. And as far as I’m concerned ratios with EV(Enterprise Value) in it have their place, but I don’t believe they tell you much about the current business performance of a company. From Investopedia we have the explanation ... ”Think of Enterprise Value as the theoretical takeover price. In the event of a buyout, an acquirer would have to take on the company's debt, but would pocket its cash.” Once again, it’s about the liquidation of a company or the sale of a company. And as far as DCF is concerned, the further ahead you look the less reliable the answer due to its reliance on predicting a forward interest rate. We’ve all seen how interest rates have gone through the floor in recent times. Who would have predicted that 5 to 10 years ago ? Yes, I’d agree that now may not be a good time to buy NFLX for the reasons I mentioned in #1332 below. But my conclusion is based on what it seems NFLX may earn in the next 3 to 6 months and relating that to a P/E ratio that the Market has been prepared to trade the stock at. It’s not based on a Book Value or a Value that someone may be prepared to buy NFLX for, or for what the company’s liquidated value may stand at. At the end of the day it will be the quality of NETFLIX’s future financial results that will, or should, be reflected in its share price. Needless to say, there’s no Holy Grail of financial ratio(s) that will always and reliably provide good Capital Gain. However, IMO, looking at things from a Balance Sheet perspective is probably more in line with calculating a Selling or Liquidating value of a company, whereas looking at the Income Statement is probably more in line with interrogating the current and near-future business performance of a company. Of course, you and others may disagree, but that was the point I was making in a, believe it or not, non-sneering manner. P.S. Good to see EBIX trade up at $22.70c during the course of today. I hope it's providing a very positive contribution to your portfolio.