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Disclosure About The PEA© - Peers Evaluation Analysis (A Proprietary Model Of PLEXOR)

The Peers Evaluation model is a proprietary copyrighted evaluation model that is based on some basic assumptions, which makes it rational and useful, even if cannot be taken as a standalone evaluation method. Indeed it isn't precise, nor specific, but may be useful to gather some important evidence from comparisons. Furthermore, a major drawback of this model is that a company may operate in different fields at the same time which makes it difficult to be assigned to a specific bundle. The main assumption is that if we take a bundle of companies belonging to the same business field on the long run, each single company will tend to reach the same average financial metrics (otherwise they will exit the market). The same assumption must be true also for new entrants. In practice, fundamental ratios from profit and loss, balance sheet, and cash flow statements, as P/S (price to sales), P/EBIT (price to operating income), P/E (price to earnings), P/BV (price to book-value), as well as P/FCF (price to free cash flow), should lean towards the average bundle value in the long term. A further assumption of the model answers the question: what if? What would be the price of a peer company if its fundamental ratio is the average one? This price is then computed for each ratio and the following step is to find out the average price of the results. This final figure is the one to be compared with the stock price to gain a sense of potential over/under/fair valuation. Some specific circumstances may request some specific adjustments as for example the use of a median value instead of an average.

What follows is an example extracted from a passed (Y2013) valuation of Apple Inc.

Name

P/S

P/EBIT

P/E

P/BV

P/FCF*

Close@28July

 

Apple inc

2.4

8.0

10.6

3.2

9.4

$440.61

 

Dell Inc

0.4

9.4

12.2

2.1

8.0

$12.94

 

Samsung Elec.

0.9

6.0

7.6

1.5

8.4

KRW 1,303,000

 

Google

5.3

23.2

25.3

3.7

24.0

$885.35

 

IBM

2.1

10.5

13.8

12.3

14.7

$197.35

 

EMC Co

2.5

14.1

20.0

2.5

11.3

$26.50

 
               

Average

2.3

11.9

14.9

4.2

12.6

   
               

Apple inc

$422.69

$652.17

$619.77

$575.58

$592.32

$572.51

-23.0%

Dell Inc

$73.05

$16.32

$15.86

$25.92

$20.51

$30.33

-57.3%

Samsung Elec.

KRW 3,211,767

KRW 2,577,065

KRW 2,562,140

KRW 3,572,492

KRW 1,962,449

KRW 2,777,182

-53.1%

Google

$379.81

$453.91

$521.19

$1,003.72

$466.49

$565.02

56.7%

IBM

$209.31

$222.18

$214.09

$67.88

$169.01

$176.49

11.8%

EMC Co

$24.07

$22.32

$19.72

$45.58

$29.59

$28.26

-6.2%

 

What IF?

What IF?

What IF?

What IF?

What IF?

Average

Delta

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.