User 305589

CA: Great Value Play

Agreed, but: INTC is a fortress enjoying virtually a monopoly and the cash flow it generates through that power is used to reinforce its moat. CA, on the other hand is just one software company among others (and not particularly well managed, at least not when I look at their foreign operations - I know a couple of people from various international subsidiaries of them) and their products can be rather easily replaced by competitors. So if anyone would ask me which of the two companies will still be around 5 years from INTC has far higher odds. essentially you pay a lower risk premium for CA than for INTC even though the stock is much riskier than INTC. It doesn't make sense and will certainly be corrected over time

On May 15 07:29 PM igggy wrote:

> Looks like a good pick but not a screaming value. Perhaps if it drops
> back to $12 it would be. The insiders are not buying either. I am
> not impressed.
>
> To User 305589: INTC is in hardware business and theoretically companies
> don't have to upgrade their hardware every year. CA is in software
> consulting which is (almost) always in demand.

CA: Great Value Play

sorry, but in a world with far less liquidity, far less capital (destruction, deleveraging, govt sucking up trillions) than the past 10 bubble years, free cash flow multiples will be considerably lower for years to come. much less capital available for invbestment will lead to compressions of p/e and p/cv ratios. cash flow multiples above 20 will hardly be sustainable going forward for most stocks, except special cases and exceptional growth opportunities. i can't see why ca is in any way undervalued in this light, even more so as it operates in a highly disruptive sector (software, technology). in relation to INTC with its near-monopoly, for instance, CA looks darn expensive and could be out of business 2 years from now. I am certainly not willing to pay above 10 times cash flow for such a stock.