|
|
发表于 2014-1-7 12:17 AM
|
显示全部楼层
wsjboy 发表于 2014-1-6 12:40 AM 
Please excuse my ignorant, I want to ask some basic questions:
1) P/FCF : cash/free cash flow, ...
no problem, there is a lot I don't know, I will try to share what I know and hopefully it's useful. 
1) it's a good sign if we see a trend of FCF increasing over time, and yes P/FCF ratio would be better if it is smaller, and i think this is sometimes a better metric to look at then P/E.
It also really depends on the business and management…there are always exceptions, some businesses are cyclical by nature, so its FCF trend won't be very smooth, and sometimes it is a better choice to not do business and have lower income/cash flow, and this might not be obvious.
For example, insurance, profit comes from:
a) underwriting profit, the profit that an insurance company generates after paying out claims and expenses.
b) investing the float.
However insurance is cyclical, a cycle begins when insurers tighten their underwriting standards and sharply raise premiums after a period of severe underwriting losses or investing loses. This higher premium will lead to higher profit and increase competition among insurers, then many insurance will try to gain market share by lowering premium rates and relaxing underwriting standards, thereby causing underwriting losses and setting the stage for the cycle to begin again.
So a rational player will do lots of business on years when premium is high, and they won't cut prices when everyone else does, they are fine doing very little business when premium rate doesn't make sense, sometimes waiting for years. This is how Berkshire Hathaway's insurance business operates.
2) For scanning, i think it is common to use profit margin.
They tell different things, it could be useful to look at all three when we are looking in more depth after initial scanning.
For example, If gross margin is low, we know cost of sale is very high, we can compare that with competitors, and try to estimate if the business can reduce that cost to improve profit.
If gross margin looks good but operating margin is really low, is management being paid too much? Can they reduce workforce to cut cost? how much is depreciation? Does it make sense?
3) EV is enterprise value, it's the amount of $$ it takes to buy the whole company, after you buy the company you get all its cash and debt so
EV = market cap - cash + debt
EBITDA is Earning before Interest, Tax, Depreciation, Amortization, this could be very useful!
Good management will minimize net income to reduce tax by aggresive depreciation and leverage, in this case, it will be meaningless to look at net income.
The best example is John Malone of TCI (using leverage to buy/build lots of cable network, cut cost and improve margin, aggressively depreciate them, result is very low tax (net income) with health cash flow, after operation improved and stable, repeat, leverage to buy even more cable network…)
$1 invested during John Malone's era (from May 1973, to March 1999) becomes $933. In the same period, S&P 500 returned will be $22.
|
评分
-
1
查看全部评分
-
|
狗仔卡
发表于 2014-1-4 08:19 PM
提升卡
置顶卡
沉默卡
喧嚣卡
变色卡