09-21-2013, 10:06 AM
Chuck Carnevale has an interesting article on Seeking Alpha about stock evaluation. See http://seekingalpha.com/article/1705442-...cks-part-1.
He uses a modified version of a Ben Graham formula, which is basically a PE ratio method with factors for earnings growth and current corporate bond rate. The main advantage of this method is it will work with all stocks, while the major disadvantage is that it doesn't consider debt.
I tried it out on my spreadsheet. The result is highly dependent upon the long term earnings growth rate assumed, so it tends to default to the PE ratio of 15 discussed in the article.
He uses a modified version of a Ben Graham formula, which is basically a PE ratio method with factors for earnings growth and current corporate bond rate. The main advantage of this method is it will work with all stocks, while the major disadvantage is that it doesn't consider debt.
I tried it out on my spreadsheet. The result is highly dependent upon the long term earnings growth rate assumed, so it tends to default to the PE ratio of 15 discussed in the article.