Forum Archive Index - May 2000

[Richard Scott <richard@tkf.att.ne.jp>]

Derek

I'm with you on this on.

One has to start somewhere with valuations. P/E yardsticks and the like,
tempered for a specfifc case by market factors are thoroughly resonable
places to start.

Richard



>>Derek,
>>The approach that you have adopted in valuing FRO is simplistic
>
>Of course it is.
>
>>because at the end of the day, the price that you see flashing on your
>>screen for any stock is the MARKET price - what investors are prepared to
>>pay for a stock
>
>Yes, that's right.
>
>>based on a multitude of variables which may include future plans,
>>projected earnings and growth of business etc etc!
>
>sure
>
>>There is no such
>>thing as A + B = Potential share price.
>
>Actually I think that you can apply maths to most things.
>
>I wasn't suggesting that 40c will be the price that it
>will sell at, I was suggesting that 40c is a
>reasonable price for FRO.
>
>As my estimate had such large assumptions in it, there
>are very large errors here.
>
>Three factors that I haven't included -
>
>The Eric Watson Factor (2 *) = 80c
>
>The US meltdown factor ((/2) = 20c
>
>The Baycorp factor (p/e ratio of 35) = $1.80
>
>etc etc.
>
>I did include my own factor -
>
>What I would pay for it factor - 20 * estimated earnings based on the
>fact that my estimated eps of 5c is probably really going to be about
>2c after initial costs of setting the company up, software developement
>etc.
>
>If you don't have reasonable estimates of future earnings and prospects
>what are you going to use to determine the value of a share?
>
>Its market price? - That sure didn't work for ITC at 50c it looked
>cheap historically, also had good future prospects etc.
>
>>You will probably find that FRO will re-open at a very high premium as all
>>indications point to
>>tremendous investor interest in the prospects of this stock.
>
>Sure, but people that pay inflated prices for any company
>right now will get hurt when the U.S. has another big correction.
>
>(of course)
>
>Derek.
>
>
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