Skip to main content
Message Font: Serif | Sans-Serif
No. of Recommendations: 1
ZB - -

You say:

So while I don't have any problem with the use of these formula's per se, I don't think that they would be all that helpful (and might even be a disadvantage) to those who aren't fully clear as to the basics one needs to know before believing the "magic" numbers these formula's tend to spit out.

While I may agree that you can manipulate certain numbers in the DCF, I'm not sure I understand where you'd get "magic" numbers in an ROIC calc.

Even with the "magic" numbers in the DCF calc, a stock is only worth the discounted value of its future cash flows - - so why wouldn't you attempt to try to measure this? We are not always going to be right on the money, actually probably never will be, but with an honest, conservative evaluation of the business fundamentals, we should be able to get an idea of where the price should be.

I know that I've seen you (or I guess read you) on the BRK board, so I'm sure you've heard WEB's saying: I'd rather be vaguely right, than precisely wrong. I think that this applies here.

In the end though, I don't believe that any of us can say that there is this "right" way to calculate whether a stock is a good purchase or not, as too many people do this in different manners and still make a lot of money.

I like the DCF and the ROIC. I find that the more that I delve into the numbers of a business, the better I begin to know it.

The Wolf
Print the post  


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.
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
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.