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: Stavisky who wrote (50551)	1/10/2013 1:43:02 AM
From: Spekulatius	2 Recommendations Read Replies (1) \| Respond to of 78608

Well, if I do a conservative calculation, and override the WACC that this spreadsheet calculates (5.89%) with 8% (my default), I get and intrinsic value of 1.18$/share... I don't like the way the spreadsheet calculates the WACC, because a) it uses beta to calculates the cost of equity (relative to market). You assumed a beta of 1.0, which seems kind of low, but the stock has been stable lately. A higher beta would push up the cost of equity and the WACC b) record low interest rates lower the WACC in heavily leveraged situations (71% weight of debt for STRZQ). It seems counterintuitive that a highly leveraged company has a lower cost of capital than a company that would have not debt. Again, it is quite instructive to play with the numbers in this spreadsheet, almost more instructive, than just taken the numbers that it gives you. Not surprisingly, just changing some numbers will show that this stock could be quite overvalued (see above), which tells me that the margin of safety isn't there for this stock.