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I already posted this on the Nokia board but it might fit a bit better here.

P = ProjEPS * (8.5 + (2*G)) * (4.4/AAA yield)

For Nokia this is

P = 0.72 *`(8.5 + (2* 18% [from])) * 4.4/6.25%) = 0.72 * (8.5 + (2* 18)) * (4.4/6.25) = 0.72 * (8.5 + 36) * 0.704 = 0,50688 * 44.5 = 22.557

I would have guessed that 18% equals 0.18 but judging after the article this is not how you calculate it here, in which case you would get funny numbers anyway.

So there we have our $ value for Nokia stock as of Graham. Seems like we are only very slightly undervalued.

We would still have to do this:

1. Eliminate all firms with negative earnings (losses).

Ok, done ;)

2. Eliminate all firms with debt to total asset ratios greater than 0.60 (i.e., firms with total debt greater than 60% of total assets).

Nokia has almost no dept. Ok there.

3. Eliminate all firms with share prices above net working capital per share.

Total Current Assets are 13 207 000 000 EUR; Current Liabilities are 8 091 000 000 which leads to roughly 5 116 000 000 in net current assets aka net working capital if I am not mistaken. We have 4 716 080 000 shares. Hmmm... That kind of blows up that point doesn't it? I mean we are close to 1 EUR in terms of net working capital per share or did I miscalculate something here?

4. Eliminate all firms with E/P (earnings divided by price) that are less than twice the AAA bond yield.

Earnings are 0.66, I'll just take 0.70 because it doesn't matter. We devide this by 20 USD then we have emmm... 0.035 which is way below AAA Bond Yield. Of course in this case the bond yield would be 0.065 not 6.5 like above ;)

Hmmm... Now me is confused a bit. Help anyone? :)

Oliver aka BizKiffer
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