Wed, Jul 23, 2014, 2:58 AM EDT - U.S. Markets open in 6 hrs 32 mins

Recent

% | $
Click the to save as a favorite.

Nautilus Inc. Message Board

you are viewing a single comment's thread.

view the rest of the posts
  • astral_tsar astral_tsar Jan 20, 2004 4:10 PM Flag

    Value Estimate -- Comments?

    amsterbri --

    I hear you. But Nautilus' ROE is about 20% right now, isn't it? The earnings yield is only 6% or 7%, agreed, but the return for the stock -- if they do retain earnings and successfully grow -- is somewhere in the middle ground between 20% and 6% for all but the shortest-term investors.

    For those investors who have a risk-free opportunity paying say 10%, I gotta agree, those guys would probably be best off receiving the whole dollar in dividends.

    W/r/t risk, I'm not using the risk-free rate because I think there's no risk. I've actually assigned the "growth" scenario a mere 33% probability by averaging it at equal weight with two no-growth scenarios. So I'm assuming it's pretty high risk. Using the risk-free rate only to avoid double counting the risk.

    If Nautilus needs funding beyond its own earnings, then I agree that debt seems much better deal than equity given the undervalued (imo) stock. At $50 per share I'd reverse that and sell shares to pay off debt.

    The business cost of capital isn't a function of share price behavior unless they do in fact get their capital by issuing shares. For example, a private company has no share price yet it still has a well-defined cost of capital.

    SortNewest  |  Oldest  |  Most Replied Expand all replies
    • After unpleasant experiences with NLS and another investment or two, I think that almost all that can be said about growth is that it's "probably positive" or "probably negative"; thus DCF models are an instance of "garbage in, garbage out". ROE, averaged over the last several years if you believe the company has recently suffered a temporary setback, is of course useful, but only in relation to what you have to pay for equity. Damodoran's well-known book on asset valuation suggests using (P/B)/ROE as a stock selection criterion.

    • Astral,

      I hear you. I agree that NLS is taking the right path reinvesting earnings at the higher ROE. And since you probablility weighted the scenarios, I see your point regarding your assumed discount rate.

      I don't have time to do the math, but it would be interesting to average your mid and high scenarios, and then discount using the equity discount I offered up before ( I think it was around 10.5% if remembering correctly).

    • On the other hand, amsterbri, if Nautilus found a way to borrow $20 per share and pay it out as a one-time dividend, I'd vote for that! :-}

 
NLS
10.62+0.30(+2.91%)Jul 22 4:01 PMEDT

Trending Tickers

i
Trending Tickers features significant U.S. stocks showing the most dramatic increase in user interest in Yahoo Finance in the previous hour over historic norms. The list is limited to those equities which trade at least 100,000 shares on an average day and have a market cap of more than $300 million.