Any Risk To Prospective Free Cash Flows Must Be Used When Determining Discount Rate for Share Prices

August 2nd, 2012 by hackel Leave a reply »

Imagine if surgeons used same methods as 50 years ago-Crazy, right?

Then why are investors using same tools to analyze risk, given superior methods are available?-see http://amzn.to/T4x71d

Sales, cost of sales, SG&A and tax rate stability. Free cash flows and operating cash flows with the making of proper adjustments. Self-insurance. Litigation. Credit. Derivatives. Yield Spreads, etc, etc. If you are not doing this as part of your risk analysis and much much more, you don’t know how to analyze and quantify risk. Your are using the wrong discount rate ( cost of equity) in concluding the fair valuation of the enterprise and share price.

I show you how.

Stop using the same tools as investors who continually dole out poor advise.

 

Order Security Valuation and Risk Analysis. After all, it took 40 years of my experience in this business to write

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