Franchise P/E

where

Is Franchise P/E:

Observed - Base P/E

where
(Base P/E = 1/r)

or

FF * G

where
FF = (ROE - r)/(ROE * r)
G = g/(r-g)

SpyAli

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2^#

发表于 2011-7-13 15:02 | 只看该作者

both are the same.... (or should work out the same)

two ways to bell the same cat.

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SFoyil

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3^#

发表于 2011-7-13 15:02 | 只看该作者

they are not the same. 2nd formula uses only fundamentals. 1st uses market price. what if the shares were way over valued and Observed P/E is 10000000000

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tikfed

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4^#

发表于 2011-7-13 15:02 | 只看该作者

Sorry - I meant to say

Justified P/E - Base P/E.

Justified = (1-b)/(r-g)

Base = (1/r)

Remaining = FF*G = (1/r - 1/ROE) * (g/(r-g))

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FinancialAnaly

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5^#

发表于 2011-7-13 15:02 | 只看该作者

so, in the stalla book it first says
Franchise PE = Observed - Base
then gives the other formula.

is the first one just wrong or am i missing something?

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b_sea93