I was wondering why you consider Harley Davidson a high CapEx stock and not WalMart?

If my calculations are correct, WalMart’s CapEx in some years doubles even triples

the FCF. Are there other numbers to consider besides CapEx and FCF?

Also, what would you consider a good inventory turnover in relationship to profit margin?

Thank you Joe for your great website and your wonderful book!

The textbook business eats cash and margins are low although it does enjoy a moat. It has other businesses with very low margins as well which I wonder about…

You can’t deny though, if you have faith in MCO , then you can certainly have faith that MHP will generate owner earnings in the future as long as things remained as they did in the past. (I think this market has opened to competition now).

Excel is your friend! You can download the historical prices from Yahoo! Finance. Then, go through the past annual reports to try and calculate intrinsic value for each year.

Once you’ve done that, it’s a matter of merely creating a chart in Excel. It takes a little work; but, it gives a great perspective.

Thanks

John

The graph is pretty simple – get the historical prices (from Yahoo! Finance), you know how to calculate intrinsic value – plot one over the other.

Tom: Thanks for the baby boomer input!

I completely agree. In addition, the average age of the Harley rider is increasing and unlike cars, how many new bikes will be bought by riders in their 60′s? At 55 I may be riding my last sports bike and moving over to a 700 lb. Harley is not in my future.

A lot has been written about the disposable income of the retiring boomers. I would guess that Harley will receive much less of that cash than is currently assumed by extrapolating their past growth rate forward.

Great site and thank you for sharing your VI POV!!!

Can you explain how do you construct the graph of Market Cap vs. Estimated Intrinsic Value ?

Do you go back to 93 and estimate IV based on FCF and Owner Equity ? What do u mean by “actual results from operations” ?

Do u have any excel with this graphical capability ready, you can share with us.

Thank you in advance.

Best Regards

Gustavo

Take a look at today’s post about Shareholder Equity. If that doesn’t answer your question, let me know and I’ll try to clarify a bit.

Your analysis on JNJ is excellent, and thanks for providing your calculations in Excel. Yours is the most in-depth analysis I’ve seen anywhere.

I was using the spreadsheet to value MCO and had a question and an observation:

Question: MCO’s shareholder’s equity has been negative from 1997-2003 primarily due to share buybacks. This results in a very high CROIC and shareholder equity growth for all periods is 0%. Calculation-wise, those results are correct, but do I need to consider anything else? (I can send you the spreadsheet if you want – let me know your email address)

Observation: On FCF, I tried to use Morningstar data, but for some periods it was 0 so I had to go to the 10-K’s cash flow statements. I noticed Morningstar’s FCF includes discontinued operations in operating activities, but excludes it for cap ex. Also, Morningstar excluded “additions to intangibles and computer software” in cap ex, which was a way bigger number than additions to “fixed assets.” Personally I think disc ops should be excluded completely, and since MCO is a service company, intangibles should be included as cap ex. For a preliminary calc, relying on Morningstar is OK but for those very serious about buying a stake, I recommend going directly to the cash flow statement for accuracy.