Fair Value with Negative Growth
by: Hari Wibowo
Our investing journey revolves around finding the fair value of a common stock. You can invest in companies that grow rapidly and lose money. On the other hand, you can also invest in companies in a declining industry, yet you can still make money. Investing profitably does not merely depend on what you invest in, but rather how much you pay for a given company.
Therefore, let's look at company with negative earning growth. How do we value them? For a 0% growth company, P/E ratio for the fair value is 13.4, which is equal to 7.45% return year in and year out. For negative growth company, P/E ratio should be lower of course, since it is giving less and less as the year goes by.
Let's try valuing negative growth with the following assumption. EPS growth is negative ten percent for the next five years and then stay constant. EPS for the current year is $ 1.00. So, after five years, EPS will come in at $ 0.59. Now, this is the constant $ 0.59 that we will get five years from now. The value of that cash flow today assuming 4.5% discounting rate is $ 0.47. Applying P/E of 13.4, this company is fairly valued at $ 6.34. Currently, earning per share comes in at $ 1.00 per share. If you look at the stock trading at $ 6.00, you may think that it is cheap since it is trading at a P/E of 6. But, if you expect it to have negative growth of negative ten percent for the next five years, this P/E of 6 doesn't sound cheap after all.
If you expect negative growth, even a seemingly low P/E ratio does not translate into profitable investment. The industry I can think of right now is the auto industry. The US auto maker has been struggling for years to compete with its Japanese counterparts. Investors has priced in negative growth for quite sometime now. If you look at say GM or Ford, they have been trading at a seemingly low P/E ratio for several years. Until this year, both of them has been able to post profits. This year, they are all expected to post a loss. The moral of the story here is to watch out for company with low P/E ratio.
About The Author
Hari Wibowo Want more investing ideas? You can get it for free by visiting our commentary section at http://www.noviceinvesting.com.
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Consolidate all your Debt into One Monthly Payment
Consolidate all your Debt into One Monthly Payment
by: John Mussi
Are you feeling overburdened with debt? Are you paying out too much every month for your credit cards, store cards and loans? Then why not replace them all with one, lower, convenient repayment through a UK consolidation loan?
Consolidation loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest.
Secured on your UK home, low cost, low rate, cheap, low interest UK debt consolidation loans can sweep away the pile of repayments to your credit and store cards, HP, loans and replace them with one, low cost, monthly payment ? one calculated to be well within your means.
With a UK Debt Consolidation Loan you can borrow from ?5,000 to ?75,000 and up to 125% of your property value in some cases.
A UK Consolidation Loan is a low cost loan secured...
Consolidate all your Debt into One Monthly Payment
Cheap flights > Consolidate all your Debt into One Monthly Payment
Plan Weddings In India With Cheap Flights And Hotels In India!
Plan Weddings In India With Cheap Flights And Hotels In India!
by: Annie Jones
Located just a short drive from the capital city, New Delhi and close to Agra (home to the Taj Mahal), the royal city of Jaipur (also known as ?The Pink City? due to the predominant colour of its buildings), is well established as one of the most romantic places on earth to get married.
From the rich history of its palaces to the gorgeous landscaped gardens of the luxury hotels to the serenity of the floating palace on Ramgarh Lake?everywhere you look there is pink?the colour of romance.
Jaipur is the throbbing, vibrant capital city of the colourful state of Rajasthan where the regal ambience of yesteryear is still felt throughout the city?s numerous carved arches and once-bejewelled fortress walls.
Enter this mystical city through a narrow, cobbled street where street vendors selling everything from sweetmeats to silver trinkets and leather...
Cheap flights > Plan Weddings In India With Cheap Flights And Hotels In India!
Find Out How You Could Find Low Airfares
Find Out How You Could Find Low Airfares
by: John Navata
Unless you are planning a short domestic trip, the cost of airfare is usually a deciding factor in an overseas trip. Most people with moderate incomes simply can't afford to fly regularly, as much as they would like to. There are, however, some people out there who are flying all the time on regular incomes. The secret to achieving this is a willingness to be flexible and shop around with airfares, as well as employing some tried and true discount travel techniques.
The key to getting a cheap flight is to shop around, and the internet makes this easy for almost anyone to do. There are a plethora of websites that will conduct searches around the world for cheap airfares. Although the internet is a valuable tool in discovering cheap airfares, it's important that you don't rely on it entirely. Many sites claim they are searching "all flights" for the cheapest possible fare, but you really...
Find Out How You Could Find Low Airfares
Cheap flights > Find Out How You Could Find Low Airfares
Save On Food - Ten Ways
Save On Food - Ten Ways
by: Steve Gillman
To save on food, be an opportunist. Buy what you like, but buy on sale. Do you need oranges every day? Buy them when they're cheap, then buy grapefruit or orange juice when it's on sale. Opportunism is the key to low-cost living in general. You get everything you like, and lots of variety, because everything goes on sale once in a while. Here are ten more ways to get cheap food.
1. Stock up during sales. We recently bought 20 or 30 cans of tomato paste on sale for 10 cents per can. That's cheap food. You can do this with all non-perishables.
2. Try store brands. Some are as good as name brands and some aren't, but all are cheaper. Test them, maybe without telling the kids.
3. Buy fruits and vegetables in season. They are at their highest quality at the point where the price is the lowest.
4. Garden. Gardening can be a great way to stay in shape, and can help you save on food as well.
5....
Save On Food - Ten Ways
Cheap flights > Save On Food - Ten Ways
Consolidate all your Debt into One Monthly Payment
Consolidate all your Debt into One Monthly Payment
by: John Mussi
Are you feeling overburdened with debt? Are you paying out too much every month for your credit cards, store cards and loans? Then why not replace them all with one, lower, convenient repayment through a UK consolidation loan?
Consolidation loans can give you a fresh start, allowing you to consolidate all of your loans into one - giving you one easy to manage payment, and in most cases, at a lower rate of interest.
Secured on your UK home, low cost, low rate, cheap, low interest UK debt consolidation loans can sweep away the pile of repayments to your credit and store cards, HP, loans and replace them with one, low cost, monthly payment ? one calculated to be well within your means.
With a UK Debt Consolidation Loan you can borrow from ?5,000 to ?75,000 and up to 125% of your property value in some cases.
A UK Consolidation Loan is a low cost loan secured...
Consolidate all your Debt into One Monthly Payment
Cheap flights > Consolidate all your Debt into One Monthly Payment
Booking Your Holiday
Booking Your Holiday
by: Joseph Kenny
There are many ways to go about planning and booking your holiday. You can go into a travel agent and get a package deal, which included flights, car rental, hotel accommodation, and maybe even some of the activities that you would like to do when you get there.
Booking Online
A slightly more adventurous way and time consuming approach is to go online and find out what is available. Book your own flights, find your own hotel, arrange your own car rental, and do what you choose. This method of holiday planning requires a lot more effort from you. You have to be prepared to come with your own destination, then research on the various flight offers that are available and make sure you a get a good deal, you also have to look up hotels in the area and find a good hotel at a good price that is in the area and with the amenities you want.
Then car rental will also have to be arranged separately....
Booking Your Holiday
Cheap flights > Booking Your Holiday
4 Reasons You Should Make WebConferencing Part of Your Business Today:
4 Reasons You Should Make WebConferencing Part of Your Business Today:
by: Richard Martin
1)It is cheap. The prices on webconferencing services have come way down in recent years. What used to cost literally hundreds of dollars has since deflated down to extremely affordable prices. Snoop around the web and you will find that decent webconferencing services can be had for as little as $20 per month. Buyer beware should be the rule as usual but this stuff isn't only for $100 million dollar businesses anymore.
2)The productivity boom. Webconferencing can drive your business to be more productive. No doubt. More than half of my day used to be wasted going to and from meetings. Cutting out just 15% of travel time can make a huge difference. Wouldn't you rather be doing something else besides waiting to go to meetings? Webconferencing can significantly cut down on your wasted time and can help your business become more profitable also.
3)The...
4 Reasons You Should Make WebConferencing Part of Your Business Today:
Cheap flights > 4 Reasons You Should Make WebConferencing Part of Your Business Today:
Cheap flights
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