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Nautilus Inc. Message Board

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  • astral_tsar astral_tsar Mar 11, 2003 9:55 PM Flag

    Margins and ratios

    aluisious81 asked...
    "Anyone have an analysis of how NLS margins and financial ratios (ROE) will change in the future as growth slows?"

    Just my opinion here, but why worry about slow growth vs fast growth when the little darling is selling at 5 times earnings? If NLS' present earnings were to _decline_ exactly 10% per year, the net present value (discounted by ten-year treasury rate of 3.6%)would be perhaps

    NPV = $2.50/(10%+3.6%)=$18.40 per share.

    Growth -- slow, fast, whatever -- would just be icing on the cake, right? Am I just confused? If this puppy just returns a consistent $2.50 a year forever then we're all rich. Right? Tell me what I'm missing!

    If anyone can sort of interpret what I just asked, please post *something* before my brain explodes.


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    • Investors won't go for falling earnings. There's no future there.

      • 1 Reply to aluisious81
      • Subj: Re: Margins and ratios
        By: aluisious81
        Date: 03/12/03 11:01 am

        "Investors won't go for falling earnings. There's no future there. "

        Well, thanks for the input ... but I was looking more for a number.

        Maybe I can ask another way. At what multiple of annual earnings do folks feel that NLS becomes a good buy? 4 times? 3 times? 2 times? 6 months' earnings?

        And if earnings growth is the only thing that gives investments value then why have the bond wonks bid 10-year treasuries up to more than 25 times annual earnings on that investment?
        Those earnings don't grow at all, yet people are paying a huge premium -- presumably to avoid risk of earnings decrease.

    • o i c. I suppose we are experiencing an Antibubble. Far be it from me to interfere.

      I feel embarrassed that I bought at a towering multiple like 5 times earnings. If you folks can talk it down to 3-4 times earnings I'll mortgage the kids and buy all you care to sell.

      See you then!

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