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Author: mvandraren One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 580  
Subject: My Projections as Promised Date: 6/10/2001 9:53 AM
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Hi folks,

I said a few days back I would post some numbers and projections I had come up with using a formula provided by the NAIC. Well, life got in the way a little bit (nothing bad, but planning a wedding, buying a house and diving deep into massive work projects all take their time!), but here is what I have come up with.

Before I begin, however, I want to reveal the assumptions I have made while coming up with these numbers. I've tended to play the numbers a little on the conservative side.

1. Since 1995, Frontier's sales have grown at a nearly constant 45%. I lowered future sales for the next five years to 30%.

2. I went with analysts projections of 15% earnings growth for the next five years. Again, on the conservative side.

3. I used Frontier's average past high P/E of 8.3 and selected a low P/E of 6 when figuring future P/E ratios, and settled on 10.00 for the low-end share price in the future. (10.00 is higher than the average past low price of 3.6, but I don't really see Frontier dropping back to that level, barring something catastrophic.)

With those assumptions, here is what I have come up with (enjoy!)

1. Sales of 1.7 billion by June 2006.
2. Earnings per share of $4.06 by June 2006.
3. A "buy" zone from $10/share to $17.90/share.
4. A "look and see" zone from $17.90/share to $25.80/share.
5. A "sell" zone from $25.80/share to $33.70/share.
6. A compounded annual rate of return of 20.1%.
7. An average annual return over the next five years of 28.2%
8. A five year appreciation potential of 140.9%.

So what does all this mean? It means that money invested in Frontier has a very good chance of doubling in about three years (an annual compounded rate of 14.9% is needed to double your money in five years...we're working with 20.1%) and it means that our airline has a bright, steady, upward-moving future ahead of it. The "buy" zone is supported by the fact that Frontier's PEG is still 0.5, meaning that Frontier is undervalued by the market.

Just for giggles, I removed Frontier's average high P/E of 8.3 and replaced it with the average P/E ratio of its competitor regional airlines. Take a look at the buy/look and see/sell zones now!!!

Buy: 10.00 - 40.90
Look and see: 40.90 - 71.80
Sell: 71.80 - 102.70!!!

Makes me think some of those other airlines are WAY overvalued and will be heading for a (pardon the macabre pun) crash -- all of which will only benefit our company!

Anyway--this has been a long post, so if you have made it this far, click here http://www.guinness.com for your reward.    =)

I hope this post opens the floor for debate. I would love to hear what the rest of you have to add or subtract, enlighten or crush about what I've written. And if any of you would like me to run this report again using different numbers you may have in your own calculations, just add a reply.

Happy wealth making!

--Michael
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