Comments on: Calculating The Value Of A Business – Part I http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/ Value Investing Blog Mon, 16 May 2011 10:55:06 +0000 hourly 1 http://wordpress.org/?v=3.3.2 By: murrare http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3605 murrare Fri, 28 Jan 2011 18:03:34 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3605 CDN, I've been wondering the same thing. Owner earnings are easy to calcuate if I'm a sole owner, but if I'm a minority shareholder it seems that FCF or owner earnings don't really matter to me when I have to live with management's decision to pay off debt, invest in other areas, etc. Those owner earnings don't reach my back pocket then. :) Love the site, Joe, keep it up!! CDN,

I’ve been wondering the same thing. Owner earnings are easy to calcuate if I’m a sole owner, but if I’m a minority shareholder it seems that FCF or owner earnings don’t really matter to me when I have to live with management’s decision to pay off debt, invest in other areas, etc. Those owner earnings don’t reach my back pocket then. :)

Love the site, Joe, keep it up!!

]]> By: CDN Investor http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3596 CDN Investor Thu, 30 Dec 2010 19:52:41 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3596 Joe, How would you treat minority interest/non controlling interest when calculating Owner Earnings? Joe,
How would you treat minority interest/non controlling interest when calculating Owner Earnings?

]]> By: sma11dragon http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3533 sma11dragon Tue, 28 Sep 2010 00:46:54 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3533 Ahh... the dash is a minus! Thank you timisme16! Ahh… the dash is a minus! Thank you timisme16!

]]> By: timisme16 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3532 timisme16 Mon, 27 Sep 2010 20:42:47 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3532 You are 100% correct. I said "Owner Earnings for the most recent fiscal year were: $2,117 million – the average capex." If you take off $290 from the number I gave, you get $1827, I just omitted that step. Hope that clears things up! You are 100% correct.

I said “Owner Earnings for the most recent fiscal year were: $2,117 million – the average capex.” If you take off $290 from the number I gave, you get $1827, I just omitted that step.

Hope that clears things up!

]]> By: sma11dragon http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3531 sma11dragon Mon, 27 Sep 2010 08:03:17 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3531 Hi Timisme16 & Rookie- I can't seem to get the same numbers that you guys explained. Here's my calculation of NOV's OWNER EARNINGS with average CapEx of $290k based on 2009 CF Net income $1,473 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization $490 Stock-based compensation $ 68 Excess tax benefit from the exercise of stock options $ (1) Equity income in unconsolidated affiliate $ (47) Dividend from unconsolidated affiliate $ 86 Intangible asset impairment $147 Other $ (99) Total Owner Earnings = 1473 + 490 + (68 - 1 - 47 + 86 + 147 - 99) - 290 = $1827 Do you know if I am doing something wrong here that I am not getting $2117? Hi Timisme16 & Rookie-
I can’t seem to get the same numbers that you guys explained. Here’s my calculation of NOV’s OWNER EARNINGS with average CapEx of $290k based on 2009 CF

Net income $1,473
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization $490
Stock-based compensation $ 68
Excess tax benefit from the exercise of stock options $ (1)
Equity income in unconsolidated affiliate $ (47)
Dividend from unconsolidated affiliate $ 86
Intangible asset impairment $147
Other $ (99)

Total Owner Earnings = 1473 + 490 + (68 – 1 – 47 + 86 + 147 – 99) – 290 = $1827

Do you know if I am doing something wrong here that I am not getting $2117?

]]> By: Rookie Investor http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3522 Rookie Investor Thu, 09 Sep 2010 02:28:59 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3522 Timisme16 - You're a genius! thanks man...that's simple enough. I'll finish reading the book and see if NOV has any value at it's current price point. Thanks again. Rookie Timisme16 –

You’re a genius! thanks man…that’s simple enough. I’ll finish reading the book and see if NOV has any value at it’s current price point. Thanks again.

Rookie

]]> By: timisme16 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3521 timisme16 Wed, 08 Sep 2010 03:34:10 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3521 Hey Rookie, It's actually pretty easy to find non-cash expenses. Go to the most recent 10-K for NOV. Then go to the CF statement. See where it says "Change in operating assets and liabilities..."? You want to avoid the line items under that category. Everything above that are the non-cash expenses. That's it, it's that easy. So for NOV, Owner Earnings for the most recent fiscal year were: $2,117 million - the average capex. Hope this helps. Hey Rookie,

It’s actually pretty easy to find non-cash expenses. Go to the most recent 10-K for NOV. Then go to the CF statement. See where it says “Change in operating assets and liabilities…”? You want to avoid the line items under that category. Everything above that are the non-cash expenses. That’s it, it’s that easy. So for NOV, Owner Earnings for the most recent fiscal year were: $2,117 million – the average capex.

Hope this helps.

]]> By: Rookie Investor http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3520 Rookie Investor Tue, 07 Sep 2010 17:09:16 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3520 Any help on figuring Non-Cash. PLEASE - I'm almost done reading the book. So far so good. I'm stuck though on figuring out what should be easy, based on the formula for Owner Earnings, reading the Cash Flow Statement. I'm looking at NOV (National Oilwell Varco Inc.) 12/2009 Cash Flow Statement. Net Inc (1.469m)+Dep & Amor (490k) + Non Cash (???) - 3yr avg Cap Exp (290k). Of course I come up with positive cash of 1.7m. That seems like a ton of cash to me, but without the Non-Cash figure, I cant be sure. What is, and how do I figure out the figure for Non-Cash? I've also seen a simpler formula where someone on this website took the Total Cash Flow from Operating activities (2.1m) and subtracted the Average Capital Expenditures of (290k)...obviously I come up with 1.8m in owner earnings - close to my initial figure but still off. Which way is correct? Sorry for all of the questions, but I appreciate the help. Thanks, Rookie Investor Any help on figuring Non-Cash. PLEASE -

I’m almost done reading the book. So far so good. I’m stuck though on figuring out what should be easy, based on the formula for Owner Earnings, reading the Cash Flow Statement. I’m looking at NOV (National Oilwell Varco Inc.) 12/2009 Cash Flow Statement. Net Inc (1.469m)+Dep & Amor (490k) + Non Cash (???) – 3yr avg Cap Exp (290k). Of course I come up with positive cash of 1.7m. That seems like a ton of cash to me, but without the Non-Cash figure, I cant be sure. What is, and how do I figure out the figure for Non-Cash? I’ve also seen a simpler formula where someone on this website took the Total Cash Flow from Operating activities (2.1m) and subtracted the Average Capital Expenditures of (290k)…obviously I come up with 1.8m in owner earnings – close to my initial figure but still off. Which way is correct? Sorry for all of the questions, but I appreciate the help.

Thanks, Rookie Investor

]]> By: AdamGaglio http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3517 AdamGaglio Sun, 29 Aug 2010 20:58:13 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3517 No, that's a quote from Security Analysis. No, that’s a quote from Security Analysis.

]]> By: Cheesy Bob http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i/#comment-3514 Cheesy Bob Thu, 26 Aug 2010 08:52:05 +0000 http://www.fwallstreet.com/article/25-calculating-the-value-of-a-business-part-i#comment-3514 In the short run the market is a voting machine.... Wasn't it Charlie Munger who said this? In the short run the market is a voting machine…. Wasn’t it Charlie Munger who said this?

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