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Nautilus Inc. Message Board

  • astral_tsar astral_tsar Sep 18, 2003 3:31 PM Flag

    Likely NLS Valuation Suggestion

    The average annual owner earnings* of the Nautilus Group for the past three years have been $1.80.

    Take two future scenarios: one in which EPS averages $1.80 and another in which they're much lower (I've picked a scary $0.50 for the gloomy scenario). (Cash is $2 per share; I'll use a risk-free discount rate of 6%.)

    Happy Scenario: (say 50% probable)
    $1.80/6% = $30 + $2 = $32. Let's say that this is what we longs hope our shares are worth.

    Gloomy Scenario: (say 50% probable)
    $0.40/6% = $6 + $2 = $8. Let's assume that this is what shorts are hoping the shares are worth.

    Split the difference: $32 and $8 average to $20 per share "compromise value". That's not a crazy number.

    So ... doesn't it seem likely that the stock will trade for about $20 sometime?

    *"owner earnings" was defined by Buffett as (reported earnings) + (depreciation and amortization charges) - (capex required to maintain present competitive position). Some people use the term "free cash flow" for this ... but some folks use FCF to mean other things too.

19.44+0.05(+0.26%)Nov 27 1:02 PMEST