Coke Vs. Pepsi: What Does Return On Equity Analysis Reveal? [View article]
Thanks Moore. The calculations are based on the company as a whole, so it should be incorporating the issues you brought up. In other words, it is not ONLY the beverage businesses, it all the ENTIRE business.
You do raise an excellent point in that if an investor believes that Frito Lay or other divisions are going to be key drivers going forward, it would be extremely helpful to look at the impact these changes will have on overall margins, ROE, etc. So if a certain division will now make up 30% of revenues rather than 15%, how will this change the overall ROE and other metrics for the company.
Coke Vs. Pepsi: What Does Return On Equity Analysis Reveal? [View article]
Thanks Texas. I think this ties into the point bsorge was making and my response. PEP may be growing through less profitable ventures. Then again, diversity of revenue also mitigates risk.
This analysis is clearly only one piece of the puzzle investors should be considering, but I think it does highlight the strength of KO's brand and pricing power and margins through its biz model.
Coke Vs. Pepsi: What Does Return On Equity Analysis Reveal? [View article]
Good point bsorge. The analysis is for the company as a whole, not just the soft drink sides of the businesses. So given your point about Frito Lay being the growth driver for PEP, KO might even be more attractive from the perspective of ROE drivers. Definitely worth looking into.
Abbott: Investment Opportunity Or Time To Sell? [View article]
Yes, although nothing is guaranteed. The nutrition business is the fastest growing division of the four, and management has stated that they have a lot of opportunity to expand margins in this business unit as well. In terms of the medical device division, Abbott plays in the diabetes, ophthalmology, and vascular segments, and has positive indicators in all three. Product launches in 2012 and pending approvals (hopefully 2013), as well as growth in geographically diverse markets will likely drive revenues and earnings.
KV Pharmaceutical: Surging Revenue and New Product Launch May Signal Turnaround [View article]
This goes way beyond KV. The FDA/CMS mixing approval/enforcement with pricing and reimbursement could have a huge impact on the industry. But yes, clearly this is a disappointing development for KV.
KV Pharmaceutical: FDA Issues New Update On Makena [View article]
This is not my opinion, but rather what was reported in the NY Times. This is a quote from the NY Times article that I linked to above:
"F.D.A. officials said they had often been wrongly accused of considering price in drug approval deliberations and had always been able to reply that price was never a factor. “We can’t say that anymore,” a top F.D.A. official said unhappily."
KV Pharmaceutical: FDA Issues New Update On Makena [View article]
I interpreted the release to mean that clinicians should have a good reason for prescribing a compounded version of the product ("necessary for the particular patient... provide a significant difference... compared to the FDA-approved commercially available drug product"), or else they should be using Makena.
This, combined with the CMS release reminding "States of their responsibility to cover FDA approved products, such as Makena, that qualify as covered outpatient drugs under the Medicaid drug rebate program" seem like positive developments for Makena and KV.
3M's Dividend Is Overvalued And Growth Is Risky [View article]
Hi Tom,
I'd probably say that 20-year or 30-year treasury rates are probably a more appropriate RFR to use. So adding a 5% risk premium would put the discount rate more in the 7.5-8% range based on the way you're approaching it. Still, I think choosing a discount rate is more "art", so I'm definitely open to your point that the rate could be higher than some investors would use.
I wouldn't give too much credit to how the valuation lines up with analysts' estimates though. Most don't use a dividend discount model to generate price targets, and are more likely using a DCF model or some other approach.
Exxon Mobil: Consistent Dividend Growth - But At The Right Price? [View article]
@Phenom1 - thanks for your comment and glad you found the analysis helpful!
To answer your questions: 1) decreasing the discount rate would make the stock value rise; dropping it by 400bps would SIGNIFICANTLY increase the intrinsic value; 2) I did not take sales growth into account - other than past dividend data I was strictly focused on cash flow; 3) Dividend growth assumptions should be stated in each individual article, but I tried to balance between payout ratio and free cash flow growth, as these are the two major "levers" I see companies being able to "pull" in order to sustainably increase their dividend.
Exxon Mobil: Consistent Dividend Growth - But At The Right Price? [View article]
Thanks for your comment Bob. As someone who has seen statistics applied across different fields (medicine, finance, etc.), I definitely understand your point in terms of "torturing the model" and how that effects the result.
And I COMPLETELY agree with your last point - if an investor is looking at a stock as a way to make a bet on macro trends, or if they are expecting capital gains rather than dividend growth, there are other valuation approaches that may be more appropriate. I was purely interested in looking at XOM as a dividend growing, as I feel there are better ways to play long-term nat gas.
McDonald's Dividend: Double-Digit Growth At Value Meal Prices [View article]
@New Low Observer,
Thanks for your comment! You definitely raise a good point - downside risk should always be considered by investors before jumping in.
Admittedly, I'm not really a trend follower in terms of stock price, nor do I spend a lot of time on technical analysis, so it's good to have another perspective. However, I do think that an investor's purchase price can provide them some level of downside protection over the longer term.
Coke Vs. Pepsi: What Does Return On Equity Analysis Reveal? [View article]
You do raise an excellent point in that if an investor believes that Frito Lay or other divisions are going to be key drivers going forward, it would be extremely helpful to look at the impact these changes will have on overall margins, ROE, etc. So if a certain division will now make up 30% of revenues rather than 15%, how will this change the overall ROE and other metrics for the company.
Coke Vs. Pepsi: What Does Return On Equity Analysis Reveal? [View article]
This analysis is clearly only one piece of the puzzle investors should be considering, but I think it does highlight the strength of KO's brand and pricing power and margins through its biz model.
Coke Vs. Pepsi: What Does Return On Equity Analysis Reveal? [View article]
Abbott: Investment Opportunity Or Time To Sell? [View article]
Abbott: Investment Opportunity Or Time To Sell? [View article]
KV Pharmaceutical: Surging Revenue and New Product Launch May Signal Turnaround [View article]
KV Pharmaceutical: FDA Issues New Update On Makena [View article]
http://bit.ly/KjQ4XC
KV Pharmaceutical: FDA Issues New Update On Makena [View article]
"F.D.A. officials said they had often been wrongly accused of considering price in drug approval deliberations and had always been able to reply that price was never a factor. “We can’t say that anymore,” a top F.D.A. official said unhappily."
KV Pharmaceutical: FDA Issues New Update On Makena [View article]
This, combined with the CMS release reminding "States of their responsibility to cover FDA approved products, such as Makena, that qualify as covered outpatient drugs under the Medicaid drug rebate program" seem like positive developments for Makena and KV.
3M's Dividend Is Overvalued And Growth Is Risky [View article]
I'd probably say that 20-year or 30-year treasury rates are probably a more appropriate RFR to use. So adding a 5% risk premium would put the discount rate more in the 7.5-8% range based on the way you're approaching it. Still, I think choosing a discount rate is more "art", so I'm definitely open to your point that the rate could be higher than some investors would use.
I wouldn't give too much credit to how the valuation lines up with analysts' estimates though. Most don't use a dividend discount model to generate price targets, and are more likely using a DCF model or some other approach.
Cheers!
Exxon Mobil: Consistent Dividend Growth - But At The Right Price? [View article]
To answer your questions: 1) decreasing the discount rate would make the stock value rise; dropping it by 400bps would SIGNIFICANTLY increase the intrinsic value; 2) I did not take sales growth into account - other than past dividend data I was strictly focused on cash flow; 3) Dividend growth assumptions should be stated in each individual article, but I tried to balance between payout ratio and free cash flow growth, as these are the two major "levers" I see companies being able to "pull" in order to sustainably increase their dividend.
Hope this helps!
Exxon Mobil: Consistent Dividend Growth - But At The Right Price? [View article]
And I COMPLETELY agree with your last point - if an investor is looking at a stock as a way to make a bet on macro trends, or if they are expecting capital gains rather than dividend growth, there are other valuation approaches that may be more appropriate. I was purely interested in looking at XOM as a dividend growing, as I feel there are better ways to play long-term nat gas.
Exxon Mobil: Consistent Dividend Growth - But At The Right Price? [View article]
McDonald's Dividend: Double-Digit Growth At Value Meal Prices [View article]
Thanks for your comment! You definitely raise a good point - downside risk should always be considered by investors before jumping in.
Admittedly, I'm not really a trend follower in terms of stock price, nor do I spend a lot of time on technical analysis, so it's good to have another perspective. However, I do think that an investor's purchase price can provide them some level of downside protection over the longer term.
McDonald's Dividend: Double-Digit Growth At Value Meal Prices [View article]