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Ancestry.com Inc. Message Board

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  • impressiveinvestor impressiveinvestor Sep 13, 2011 12:21 PM Flag

    My analysis of ACOM

    that's garbage! and it has nothing to do with anything ben graham taught!

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    • What precisely is contrary to Graham? I rely on fundamental analysis of revenue and profits to estimate future revenues and EPS.

      My original source for Ben's formula is:

      "The Smart Crash of October 19th" by Arbel, et.al.
      Harvard Business Review, May/June 1988, Vol. 66 Issue 3, p124-136

      The authors studied the behavior of stock prices on 10/19/87 and used a formula of Ben's to estimate how much stocks were worth. That formula is
      Value = EPS * (8.5 + 2 growth rate) 4.4/Yaaa

      You can find an entire entry on this formula on Wikipedia which cites the 1962 edition of his Security Analysis.

      Assuming growth rate is 10% and Yaaa (AAA bond yields) about 3.7% (based on the median of all AAA bonds in the Yahoo search engine) implies a fair PE of 34.

      Ancestry's current price reflects a future growth rate of 7.7%. Compare this against it's historical revenue growth rate of 30% and you might understand my optimism. This 30% is the CAGR over the last 36 months, which is higher than the 24% CAGR if I extend that to 48 months. In other words, company growth appears to be accelerating. I suspect this is due to a slow down when the economy tanked, making for better comparisons from summer '08 to summer '11.

      Jag

    • As with any model, the end result is only as good as the accuracy of the presumptions. I agree with you that $100-$150 in 1 year is unrealistic. However it is still a significantly undervalued stock, especially if one looks out 3-5 years. $100-$150 is quite reasonable over that time. Which is precisely why I am against any 'deal'.

      Thanks for sticking your neck out with a meaningful contribution. Its nice to see posts other than pom-pom waivers or school yard chumps hurling insults.