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Strategies & Market Trends : Graham and Doddsville -- Value Investing In The New Era -- Ignore unavailable to you. Want to Upgrade?

To: Freedom Fighter who wrote (370)	6/7/1998 1:40:00 PM
From: Reginald Middleton	Respond to of 1722

Thanks for the complements. <On the other hand, I wonder if you are underestimating the predictability of EPS.> My findings on EPS are derived from historical numbers. While past is not necessarily indicative of the present, it certainly does put things in perspective. I am actually a very strong proponent of economic earnings, which (at least before the application of a risk charge) closely resemble gross cash flow numbers less depreciation. The problem is that accounting EPS, is not standard across companies, does not measure the actual economic performance of a company, etc., etc. The judgements that you indicate are a must, but I believe that they must be applied to measurements that are less ambigous than accounting earnings. For example, for the 10 years ending 1/98, CSCO's accounting earnings had an appox. correlation of 0.39% with CSCO's marekt value. IMO, that is close enough to nothing as to be considered a worthless measure, yet brokers, media, and corporate management push EPS as the proxy of corporate value. According to my research, these conditions vary from company and industry, but one fairly common theme across all is that EPS is an unreliable measure. <Second, How much does your product cost?> Which product are you referring to? The valuation application is an institutional product, therefore rather expensive for individuals. The earnings to market value database will be posted on the site for "pay-per-view" querying at about $20 to $30 per query, which will allow you to view and download a report about twice as informative as the one posted at rcmfinancial.com <Third, would you be willing to provide us with S&P500 aggregate cash flow and free cash numbers?> Since I have not segregated the database according to the S&P 500 composition, I will not be offering any numbers for it. I will, however, offer aggregate numbers on an industry, sector, and subsector basis though. These numbers will be much more meaningful since each industry's financial measures have a different propensity to correlate with its market value and to lump them together would seriously dilute the results. I will post them to the Subject 21407 thread as well as my site.