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Jacob Wolinsky

Founder and CEO of ValueWalk.com (the “Site”) is a web site owned by VALUEWALK LLC, a New Jersey limited liability corporation. I am the former VP of business Development of SumZero, LLC, the world’s largest community I have prior experience in a value based pe firm focused on PIPE transactions in micro-cap companies, and at a value based research firm, which focused on smid caps.

  • jwolinsky

    Sorry I meant that. Typo there did the write up quickly. Thanks for pointing it out. I took revenue and NI.

  • jwolinsky

    I don’t look at PE averages or FCF for valuation purposes. I just used what I thought would be attractive earning or FCF yields plus it hasa nice divident. But I did state I thought it might be a tech company.

  • http://www.valueuncovered.com asues

    Jacob,

    You mentioned a GM% of 23%. Is this supposed to be net margin? (net income / sales)?

  • SBuck

    Ah, got it. Given that you didn’t have information as to what type of company it was (industry), assume you just used average PE and FCF multiples across industries?

  • jwolinsky

    I am giving the company a valuation of 12x earnings and 9.5x FCF

  • SBuck

    I’m not sure I understand this part:

    “avg EPS 2.15*12=25.82, avg FCF per share 1.1*9.5=10.45″

    Can you explain why you’re multiplying the EPS by 12 and the FCF by 9.5?

  • MWG

    I would expect thing to be trading in the vicinity of $23.75 – i.e. 12x owner earnings. A buy price would be south of $18 and a sell price just north of $22 so as to make a reasonable return oneself while still leaving something for the other guy.

    The dividend is a plus and the higher the payout ratio, the better. A profile such as this without a dividend (or buybacks) would turn me off: I can’t imagine what else mgmt could do with the cash earned that wouldn’t risk value destruction.

  • jwolinsky

    There are many different ways to calculate FCF. Most analysts I know use OCF-Capex, that is what I tend to do. My generally guidelines really shouldn’t apply here. The payout ratio is low I just did not have time to think about it with the ten minute rule. Normally I would only take out dividends if the company was paying out a significant amount of earnings. For example Altria ticker MO (which I own), which earned $3.2b in 2009 paid out $2.6b in dividends (CapEx was only $273m). In that case I believe it is appropriate to subtract dividends. Here the company earned on average ~$22 and paid out approximately ~$4.20 I do not think it is appropriate to subtract dividends. So in short the buy price of the stock would be higher than what I came up with.

  • Adam

    Jacob,

    Can you share why you subtracted dividends from the FCF calculation? I know you said you sometimes you don’t include it, do you have any guidelines or is it to err on the conservative side.

    Thanks,
    Adam

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