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.
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.