|
The Motley Fool Discussion Boards
|
Previous Page | |
|
Investment Analysis Clubs / The BMW Method |
||
|
URL:
https://boards.fool.com/gt-i-dont-think-a-decade-is-nearly-enough-time-25707614.aspx
|
||
| Subject: Re: Rule#1 method vs BMW method | Date: 7/21/2007 2:20 PM | |
| Author: mohitaron | Number: 25826 of 42393 | |
|
> I don't think a decade is nearly enough time to evaluate P/E movement. That might be true. But generally speaking, a company's avg P/E doesn't rise over time - it either stays the same or declines if growth is declining. Thus, looking at just the last 10 years is likely going to give me a conservative P/E estimate - which is primarily what I'm interested in. A conservative P/E would result in a conservative future stock price computation, and a conservative computation of current sticker price as per Rule#1 method. That said, it is certainly good to look at more data. But given that I don't know of any free Internet sites that provide P/E ratios for longer than a decade, and I'm not particularly enthusiastic about paying extra for this information, I'll just stick to what the free sites provide. > Therefore, you can calculate that P/E, estimate EPS based on > historical EPS CAGR, and come up with a future target price. But buy > the stock or not based on whether you'd be willing to hold the stock x > years from now if it continues to trade on its current EPS CAGR. Agreed. Rule#1 achieves this in a slightly different way. It advises to estimate future EPS growth as the minimum of the equity growth and analyst projected growth. I think if the current EPS CAGR is low, it'll possibly be reflected in the equity growth, and so you'll only estimate future stock prices based on this conservative equity growth. - Mohit |
||
| Copyright 1996-2022 trademark and the "Fool" logo is a trademark of The Motley Fool, Inc. Contact Us | ||