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Microcap & Penny Stocks : TSIS: WHAT IS GOING ON? -- Ignore unavailable to you. Want to Upgrade?

To: John S. Baker who wrote (3797)	9/22/1998 10:54:00 AM
From: jmt	Respond to of 6931

And I would add that I continue to be stumped by the question of what is the most appropriate multiple to assign to TSIS. The eternal question that no one can answer. And if they could they wouldn't own Yahoo. But..., if we start with a baseline of 15x (long term S&P 500 historical average) and work from there... Balance sheet - TSIS has no debt, maybe a plus Cash flow - Should be good if revenue pans out Current earning - no help Future earnings - a plus but already somewhat baked into todays prise Sustainability of earnings / margins - tough to say with a non-diferenciated product. For your model (one form of valuation) I would substitute "earnings" with "cash flow". Also, predicting future cash flow is of course not an easy task, although the TSIS business model is not that complex. But the most important issue you raise in the discounting model is what "discount rate" to use. This is every bit as subjective as what price earnings multiple to apply. And different discount rates make huge differences on present value and subsequent valuation. So what affects the discount rate? The theory is investors must receive a risk adjusted compensation equal to all other investment opportunities (bonds. Real estate, commodities...etc). How do you measure that risk? By all the same measures we used to evaluate an appropriate PE. Long and cautious.. jmt