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    3 replies to "Stock Pick of the Week: Buy Apollo Group Inc cl A (APOL)- Very Attractive Rating"

    • Brian Leung
      January 26, 2011

      You take a very interesting approach to your DCF analysis, in particular projecting a growth/decline that justifies the current valuation. That’s what Munger would call “invert, invert invert”.

      I did a similar calculation to yours using a DCF calculator that I’ve built. Check it out at:
      http://stockzoa.com/dcf/APOL/MTImLTEwJjAmMCY

      I’ve run DCF calculations of APOL in the past and it’s always been pretty compelling. More so in 2007 and i really regret missing that boat. I’m going to take a more careful look. Thanks for your analysis!

    • David Trainer
      January 26, 2011

      Brian:
      Thank you for your comment.
      I love your site. Excellent simplification of the DCF process and a great tool for investors. It is very important that more investors understand the expectations for future cash flows that are embedded in stock prices.
      My approach to valuation is better-known as “Expectations Investing” – we start with the stock price and work backwards to figure out the discounted future cash flow stream that generates that stock price. We aim to be as complete and transparent as possible about valuation.
      Here are links to the DCF page and WACC page of our model for APOL. There are many other pages in the model, notably a Forecast page where one can enter custom assumptions for revenue growth, pre-tax profit margins, cash tax rates, working capital needs and fixed asset needs. Note we have similar models for all 3000 stocks we cover.

      https://www.newconstructs.com/wp-content/uploads/2011/01/Screen-shot-2011-01-26-at-9.40.35-AM.png – DCF page from our Company Valuation Model
      https://www.newconstructs.com/wp-content/uploads/2011/01/Screen-shot-2011-01-26-at-9.42.07-AM.png – WACC page from our Company Valuation Model

      The main difference in your results and mine is caused, I think, by your WACC assumption at 12%. We are at about half that. We are probably on the low end. But the results to not vary much when you bump up the WACC by 250 basis points or so.

    • The Tree of Life
      April 22, 2011

      great blog If you are the type to update your blog regulary, then you have gained one daily reader in me today. keep up the super work.

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