As detailed in "How To Make Money Picking Stocks", quantifying the future cash flow expectations embedded in stock prices is critical to making an informed investment decision.
My mentor, Michael Mauboussin, in his latest piece: " The Importance of Expectations – The Question that Bears Repeating: What’s Priced In?" explains more eloquently than I that the key to successful investing is to systematically distinguish between price and value – two very distinct concepts.
Our Company Valuation models are very sophisticated discounted cash flow and earnings quality models.
An enormous amount of works goes into every model. I wish I could offer a short-cut (beyond our ratings and reports) for understanding our models.
Here is a free copy of our report on RIMM for readers of Ask Matt.
The valuation of RIMM's stock implies the company's after-tax cash flow (NOPAT) will permanently decline by nearly 75%.