That's exactly right. The tax-effect is usually low for a company that has lost a lot of money in the past. But even with a ton of loss carryforwards, you still have AMT to deal with.
One should use free cash flow... The company has $200 million still left in unused tax loss carryforwards.
So technically, you should use up the tax loss carryforward, then assign an income tax rate. Doesn't affect the calculations greatly.
You cannot use pre-tax earnings to determine the fundamental value of a company based on future cash flows. From the shareholder's perspective, it gives you a meaningless (and greatly exagerated) number.
P.S. The coupon rate on some bonds changes regularly and, from this point, it is fair to say that the rate of return on a variable rate bond will only increase.
raise the sample size 3 more. I just booked an Alaskan cruise, plane tickets to Seattle, WA and a rental car directly through the vendors. It took more pages plus comparing back and forth time but it was worth it. It was cheaper than Travelocity or Expedia.
I still don't know how anyone buy airline tickets thru Expedia. I recently bought a ticket for my wife to LA, checked a few sites and the airline direct (NWA) was cheaper and had a better selection.
By the way, I wish Proforma would stop by again so I could thank him for his advice to hang on to all my remaining USAI and EXPE-related shares.
They are up a little more than 10% since his dire warning two weeks ago.
It's not hype, it's fact.
All I am saying is that:
1) DCF valuation specifically takes the "Free Cashflow" and discounts it back to the present.
2) You need to make some assumptions about free cashflow patterns.
3) Sometimes, the recent past is a useful thing to look at when predicting the immediate future.
EXPE's year over year cashflow from 2001-2002 grew over 400%, and I'm only assuming 2002-2003 growth of 60%, then 50%, then 40%, then 30%, then 20%, then 10%, then 5%...
You might disagree with these numbers. That's fine. Time will tell.
But it's not hype. :-)
jeff, quit the HYPE, or maybe proforma will be back to blast you. I know EXPE earnings grew 400% last quarter over the year ago quarter, they went from $5 ml to $20 ml. That's still nothing EXPE is a $6.8 billion company and those earnings are overstated.
EXPE��s Quarterly profit (loss)
12/31/02: $21.4ml...Incr of $1.3ml or 6%
9/30/02: $20.1 ml... Incr of $1ml or 5.3%
6/30/02: $19.1 ml...Incr of $13.4ml or 235%
3/31/02: $5.7 ......Incr of $ .5ml or 10%
12/31/01: $5.2..... Incr of profit of $.4ml
9/30/01: $(4.8).... decr of loss $.4ml
(The Profit is overstated, Payroll-Option Expense is not deducted, Payroll Expense understated and other expenses may be covered by USAI)
It's not that I like bonds, it's that bonds pay their holders a steady flow of income, isn't that what DCF is trying to compare. I think the company Insiders like bonds, they certainly are not waiting for profits.
Anyway what does that 400% increase in earnings mean to an outside investor? Will they ever see one cent of it?
If you go back to MSG 7696, when do you think EXPE would able to throw off the income that $6.8bn of bonds or tax free bonds would give off-even considering their 400% increase in earnings?
Can you name one tech or internet company that has given their outside shareholders a decent return on their investment. The great Microsoft, with $40 bn in the bank is finally giving an .33% dividend. Don't talk about those MSFT investor that bought at the beginning.
Did eToys ever get profitable? Did Amazon, for that matter? Does either one have nearly $1 billion in assets with $0 long term debt? Did either one of them beat analyst forecasts for eight straigh quarters?
EXPE currently handles 20% of all online bookings (source, comScore Media Metrix). It has grown earnings consistently, year over year.
EXPE and ROOM, together, handle 60% of all online hotel bookings. Every single day, EXPE processes about 35,000 purchases made through its website.
EXPE's international businesses grew at 300% last year.
There's a good argument that says that EXPE has more assets to bring to bear (profitability, scale, distribution, marketing, brand awareness, strong parent, etc.) to stay #1 than any of the companies you mentioned.
All I'm saying is this:
For every 1% of U.S.-only travel (not to mention worldwide) that moves from offline to online, that's about $6 billion in new gross bookings that are done online.
Last year alone, EXPE's total gross bookings were "only" about $5 billion.
Is there room to grow? You bet.
Will they grow for sure? The fact that you might not think so, and I think probably so, is what makes a market.