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if you aren't going to say anything?
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Hi, AceHigh
Here is a
link to the original post I made that included this phrase. I think it's a big and widespread problem, so I was trying to draw attention to it by saying it in one thread and repeating it in another.
For this specific duo, let's say Stock1 has an intrinsic value of $40 and is currently selling for $35 in the market. In 5 years we expect its intrinsic value to be in the $60-70 range. This represents a growth rate (of intrinsic value) of 8.5-12%, which is pretty good. Ignoring dividends, if we buy it today at $35, we will realize an annualized return of 11.5-15%, even better.
Let's say Stock2 is also selling for $35 but has an intrinsic value of $55. If its intrinsic value grows to be $65-75 five years from now, it will have grown 3.5-6.5% per year. Not too exciting. But if we buy it at $35 and the gap between its stock price and intrinsic value closes, we will have earned between 13-16.5%.
That's all I'm trying to say about BUD vs. PEP. PEP may have higher growth, but that's not enough to imply that its stock is therefore a better buy. We have to also know what its current intrinsic value is, and so far nobody in this thread has given their estimates for the difference between intrinsic value and stock price for these two stocks.
(Cisco, by the way, has had fabulous growth over the last five years. Its revenue and earnings are now much, much higher than they were five years ago. It stock price, though, has declined about 75%.)