Posted by Horsefield > 2014-02-12 23:51 | Report Abuse

Earning Power Value (EPV) which elaborated by KC in below link, I believe its belongs to "Net Present Value" category.

http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/34201.jsp

Thanks KC for summarizing the valuation methods and giving valuable calculation example.
Highly appreciate that.

Posted by houseofordos > 2014-02-13 00:24 | Report Abuse

KC, nice article. If you have time, please go to HEXZA thread and comment on valuation I ve done for HEXZA using DCF method

http://klse.i3investor.com/servlets/stk/3298.jsp

Posted by AyamTua > 2014-02-13 20:10 | Report Abuse

thanks kcchongnz! love this line

"This is because you could purchase the best stock in the world, but if you buy it at a lofty premium, it is a bad investment. Vice versa, the stock could be the worst company in the world, but if bought it cheap enough, it could work out to be an excellent and profitable investment."

Posted by tjhldg > 2014-03-03 02:08 | Report Abuse

kokokokokok .....cheers AT ... i love you more and more each day as time goes by ....... wanna meet tj ?

Posted by kcchongnz > 2014-03-21 04:22 | Report Abuse

The three methods Klarman was talking about for estimating the value of the stock are:

1) Net Present Value Analysis
2) Liquidation value
3) Stock Market Value

What are the problems of using Price-earnings ratio (P/E) of method no. 3?

1) The E in the ratio is an accounting number. It can mean all sorts of things, and often not necessary cash.

2) Which E are you talking about? Last year's? Next year's? 5 years later? 10 years later? Average of last 5 years? Next 5 years?

3) Is E for the next few years the same? If not, how much it is expected to change?

4) Do you rate two companies doing similar business and with the same P/E, but one with high debts and the other without any the same?

5) What is the quality of E?
a) Is there any expected growth in this E?
b) Is net cash received a lot more or a lot less than E consistently?

"Let’s promise ourselves that we will never look at the PE multiple again as a serious tool for fundamental analysis."

The above statement is what is suggested in the article as appended below:

http://www.morningstar.in/posts/23225/5-problems-with-the-pe-ratio.aspx?utm_content=buffer60972&utm_medium=social&utm_source=plus.google.com&utm_campaign=buffer