Thursday, February 19, 2009

Seeking Alpha on Intrinsic Value

Seeking alpha hits another nice pin on the head with it's article on Intrinsic Value investing... check it out here.

The basic concept being... if you take a firm's future cash projections.... apply a decay so that they don't do equally awesome till infinity.... and then you subtract that firm's debts and liabilities... you can easily see when a firm's current debt is unsurmountable even with its projected future income....

Here is an example from Seeking Alpha.

"In the case of TRMP, SIRI, SIX, and RAD, those companies are so leveraged that the values of their future cash flows are not sufficient to pay off their debt obligations."

It's ironic that only a few years ago, investors would get really pissed off if you were sitting on alot of cash in the piggy bank... oh how the mountains turn into seas....

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