Message Font: Serif | Sans-Serif
 
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next
Author: IllustratedMan Big gold star, 5000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 14423  
Subject: Re: AEOS Date: 9/7/2005 10:22 AM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 4
Neither price reflects the debt value of leases. I have to admit I am still struggling with a way to include debt in a DCF. Its not really helpful to deduct it from the net income in one lump sum, because it is not really money going out the door in the current year and unavailable to shareholders. And the current years rent is deducted as operating expense so subtracting it again would not be right. Any ideas?

fwiw, I've never included any adjustment for lease obligations because other factors - in this space at least - will completely overwhelm this criteria in an otherwise healthy company (plus making the simple obligation that if you are going to add lease debt then you need to find something to put on the asset side to match it). As Roark has shown us, it is important to note when a company owns its real estate (esp. if they otherwise leverage themselves to the hilt ala AZO) and if you are investing in shaky potential turnarounds this is an area you ought to study exhaustively, but otherwise you could be going for way too much precision in a business that if you just look at the Value Line sheet -net margins of 1.8% in 1996, 10.9% in 1999, 4.9% in 2000, 11.9% in 2004 - has fashion written all over it, making a DCF model possibily particularly inappropriate in this space...

at least, that's my opinion.
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (6) | Ignore Thread Prev | Next

Announcements

Post of the Day:
Macro Economics

2.1: The Labor Pool Problem
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement