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Thanks for the quick response.

Discounted Cash Flow (DCF) is just another way of
looking at a stock, and says (something like):

"The value of a business is the sum of all future
cash flows, discounted to a present value".

There's a great book called "Valuing a stock" by
Gray, Cusatis and Woolridge that goes into a fair
bit of detail. Ashwath Damodaran's "Investment
Valuation" also gives several valuation methods,
including this one.

I've used the model found in book A. but changed
the Equity risk premium (made it "stiffer", or
more conservative).

What is interesting about the model is that when
I plug in values for some of the Dow stocks (I've
used CAT and AA) I get very nearly the price that
they're at now (which makes sense given that the
market should value these stocks pretty fairly
given that they're heavily followed/analyzed).

I'd be happy to send you the excel version if you're

I'm not one to tout a particular stock but Zales
seems undervalued to me. I do own a few shares
but wanted to get a feel for whether anyone knew
of any "skeletons" before tipping in a bit more.

Peter B.

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