DCF calculator is a two-stage model. The default values are defined as:
1. Discount Rate: d=12%
2. Growth Rate in the growth stage: g1=5% Growth Rate in the growth stage = average earnings growth rate in the past 10 years or 20%, whichever is less => For companies with Average Earnings Growth Rate in the past 10 years equals 0, => Growth Rate: 5%
Graham Number is a concept based on Ben Graham's conservative valuation of companies.
NTPM Holdings Bhd's Graham Number for the fiscal year that ended in Apr. 2015 is calculated as
Graham Number = SquareRoot of (22.5 * Tangible Book Value per Share * Earnings Per Share) = SquareRoot of (22.5 * (Total Equity - Intangibles) * Net Income (Continuing Operations)) / Shares Outstanding = SquareRoot of (22.5 * (360.325 - 21.038) * 42.642) / 1123.16 = 0.51 NTPM Holdings Bhd's Graham Number for the quarter that ended in Oct. 2015 is calculated as
Graham Number = SquareRoot of (22.5 * Tangible Book Value per Share * Earnings Per Share) = SquareRoot of (22.5 * (Total Equity - Intangibles) * Net Income (Continuing Operations)) / Shares Outstanding = SquareRoot of (22.5 * (393.974 - 23.633) * 56.405) / 1123.155 = 0.61
Ben Graham actually did not publish a formula like this. But he wrote in The Intelligent Investor (1948 version) regarding to the criteria for purchases:
Current price should not be more than 15 times average earnings of the past three years.
Current price should not be more than 1.5 times the book value last reported. However, a multiplier of earnings below 15 could justify a correspondingly higher multiplier of assets. As a rule of thumb we suggest that the product of the multiplier times the ratio of price to book value should not exceed 22.5. (This figure corresponds to 15 times earnings and 1.5 times book value. It would admit an issue selling at only 9 times earnings and 2.5 times asset value, etc.)
Unlike valuation methods such as DCF or Discounted Earnings, the Graham number does not take growth into the valuation. Unlike the valuation methods based on book value alone, it takes into account the earnings power. Therefore, the Graham Number is a combination of asset valuation and earnings power valuation.
In general, the Graham number is a very conservative way of valuing a stock. It cannot be applied to companies with negative book values.
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
DreamKshatriya
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Posted by DreamKshatriya > 2015-12-29 08:46 | Report Abuse
Muksibat? Apa mnatang itu ah? ...