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

To: Grantcw who wrote (41406)	2/14/2011 12:49:06 AM
From: Jurgis Bekepuris	Read Replies (1) \| Respond to of 78745

Grant, Using Buffettology spreadsheet, expected return on CSCO right now is about 11.5%. I don't buy stock using Buffettology criteria unless the expected return is at least 15%. Owner's yield (Earnings / EV) is about 8.5%. This is not bad (in a buy range), but not great. Sales only grew 2% in last 3 years, earnings dropped 5%. Based on this I am not sure what growth rates we can conservatively assume going forward. So let's say you assume 10% growth for 10 years - a hugely, enormously over-optimistic assumption - the DCF valuation at 15% discount rate is ~83B which is way lower than current market cap. So really the company is not cheap using almost any metric. The only metric that looks good is 8 year earnings growth, which is something like 23%. But do you really believe that CSCO can repeat this? If you look at MSFT all the numbers are so much better (except 8 year earnings growth ;)). So if I had to buy a tech megacap, I'd buy MSFT. In fact, I did even though I am not a huge megacap fan.