Present Value of Future Cash Flows

[Value Hunter]

Craft cheer up about Sirtex, a 15% CAGR over that time frame is still much better than the market and better than what most on ASF have achieved!!

Its like the billionaire with a net worth of $21 billion who is disappointed because his net worth "only" increased by a billion in the past year!! Its still a billion dollars and nobody is going to have much sympathy for him!

At the end of the day you made a return that is higher than the market and higher than most people in percentage terms. Also the amount (I am guessing) in dollar terms is probably an amount that most normal people could not save in a ten year time-frame.

 

[craft]

Craft cheer up about Sirtex, a 15% CAGR over that time frame is still much better than the market and better than what most on ASF have achieved!!

Its like the billionaire with a net worth of $21 billion who is disappointed because his net worth "only" increased by a billion in the past year!! Its still a billion dollars and nobody is going to have much sympathy for him!

At the end of the day you made a return that is higher than the market and higher than most people in percentage terms. Also the amount (I am guessing) in dollar terms is probably an amount that most normal people could not save in a ten year time-frame.

Not unhappy - just reflecting on an outcome.

 

[fiftyeight]

Hey guys,

Return on invested capital (ROIC) and / or Return on Capital Employed (ROCE).

I am currently playing around with this. It's fairly easy to calculate it on a basic level, although obviously there are many different subtleties.

Does anyone have (or would like to personally discuss) a link to an in-depth discussion around the Funds Employed equation? I would like to explore issues surrounding goodwill / other indeterminable life intangibles, working capital in more detail, and other adjustments that could be made to get to the bottom of the true economic reality of a balance sheet, if at all possible. For instance, it is possible that a company has overpaid for an acquisition in the past (ie Wesfarmers and Coles) and the true return on this asset is technically being understated by the goodwill on the balance sheet.

Feel free to let me know if no such discussion exists and I will gladly keep beating away at it in my own head.

Reading through this thread at the moment and came across this podcast which is semi relevant to the above topic.

http://investorfieldguide.com/dorsey/

 

[InsvestoBoy]

Hey guys,

Return on invested capital (ROIC) and / or Return on Capital Employed (ROCE).

I am currently playing around with this. It's fairly easy to calculate it on a basic level, although obviously there are many different subtleties.

Does anyone have (or would like to personally discuss) a link to an in-depth discussion around the Funds Employed equation? I would like to explore issues surrounding goodwill / other indeterminable life intangibles, working capital in more detail, and other adjustments that could be made to get to the bottom of the true economic reality of a balance sheet, if at all possible. For instance, it is possible that a company has overpaid for an acquisition in the past (ie Wesfarmers and Coles) and the true return on this asset is technically being understated by the goodwill on the balance sheet.

Feel free to let me know if no such discussion exists and I will gladly keep beating away at it in my own head.

Check out the education section of newconstructs.com ...

 

[fiftyeight]

Check out the education section of newconstructs.com ...

Had a quick look while on break, looks like just what I am after.........and the reading list keeps getting longer

 

[ducati916]

This makes sense - but you were dead right when you once said you have to know what questions to ask before getting any answers out of the great man's letters.

There's a few other pearls of widsom in that very letter too. Just small tidbits that hopefully start to add up for me. The bit about being patient and waiting for your turn to bat again is a good reminder.

The major lesson seems to be: a premium can be paid for a business with good economics, but in the long run, if you can put large amounts of incremental capital into it and earn large returns on this the purchase price often becomes unimportant.

Interesting thread.

Just with reference to this post and the (general) topic: the 'good economics' that Buffett refers to (and which can command a premium) is 'economic goodwill' as opposed to 'goodwill in excess of tangible assets'.

The trick, is of course recognising one from t'other. There are a few ways to calculate, which gives a more quantitative basis than a pure qualitative estimate, although, some values might be so compelling that they are self-evident.

Additionally, in a PPE heavy businesses, there are ways to calculate hidden free cash-flow rather than just making a guestimate or applying an arbitrary % to the calculation.

jog on
duc