Skip to main content
No. of Recommendations: 0
Hi Anurag,

I'm not really looking at these companies with other multiples like EV/EBITDA or EV/FCF (or P/FCF). I'm looking at what the market is expecting at today's price and then considering if that's reasonable or not. Some will undoubtedly appear cheaper than others on such metrics, but that's not the driving force behind this.

Dean Foods, if they can continue on their cost-cutting path, should be able to expand margins, even with the low retail price of milk nowadays. That will make them look better down the road and the price will be driven up. In my write up, I pointed out that even a 2% growth in FCF for five years, 1% for five years, and 0% after that, if the expectations turned to that, the price would see a nice boost.

With this company, I don't think the margins will ever be very high, but the low margins seen today shouldn't be what the company is capable of down the road.

Others, such as Power-One, may have more oomph behind them, so could give a really good return, but Dean Foods, even changing expectations by a few percentage points, should do well for the portfolio.

Print the post  


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.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! 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.