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Author: kcanant Three stars, 500 posts Old School Fool CAPS All Star Most Active, Foolanthropy 2013 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 211960  
Subject: A fun exercise Date: 10/6/2012 9:57 AM
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As an aside, the more a firm is growing the more important the ROE.
A growing firm with an uninteresting ROE is worth nothing extra
 due to its growth rate, and even a slowly growing high ROE 
firm is potentially worth a lot.
The PEG ratio is misleading, as it conflates growth with
 worthwhile growth.
Rather than growth/PE it should be something more like 
(1+ growth rate above inflation times amount by which ROE
 exceeds the long run median) times
(the amount by which the cyclically adjusted earnings yield
 exceeds Siegel's constant of 6.5%).

As a fun exercise, try this calculation for both Amazon and Walmart.
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Author: kcanant Three stars, 500 posts Old School Fool CAPS All Star Most Active, Foolanthropy 2013 Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 194701 of 211960
Subject: Re: A fun exercise Date: 10/6/2012 10:11 AM
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Whoops!
I hit the submit button early.
As a fun exercise, try this calculation for both
 Amazon and Walmart.

I don't know about the "growth rate above inflation"
or the "cyclically adjusted earnings yield",
but I figured out the following for WMT and AMZN.

I defined earnings yield as EBIT/EV
and cribbed the most recent annual figures
from Yahoo.

                    WMT     AMZN
ROE                22.9%   4.94%

Earnings yield      8.9%    .89%


Both companies have a business based on selling
"stuff" at a low price, but have very different
investment characteristics, no?   

-kcanant


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