4 ms·
> FB may be many things but average is certainly not one of them. Do you mean the assumption of 212% growth over 5 years is lowish? If so, I agree. As for the
by nandemo 14y ago
> FB may be many things but average is certainly not one of them.
Do you mean the assumption of 212% growth over 5 years is lowish? If so, I agree.
As for the average return: the author is fixing a price at T+5years, so if you assume a higher-than-average expected return for Facebook, then its current stock price should be even lower.
Also note that even as a back-of-envelope estimate, his analysis is flawed because the 212% figure was calculated by comparing revenues adjusted for inflation, while the 11% figure is for non-adjusted total return. The corresponding real (inflation-adjusted) average return is 7%:
http://www.simplestockinvesting.com/SP500-historical-real-total-returns.htm http://www.simplestockinvesting.com/SP500-historical-real-to...
- lunaru 14y agoI think it's even lower than 7% if you go back far enough: http://home.earthlink.net/~intelligentbear/com-dj-infl.htm http://home.earthlink.net/~intelligentbear/com-dj-infl.htm The truth is, the stock market, given a long enough timespan, barely beats inflation.
- z92 14y ago> The truth is, the stock market, given a long enough timespan, barely beats inflation. I want to believe that.
- rjtavares 14y agoI'm not even going into how they change official statistics arbitrarily on a particular time period, but the article itself says that "Dividends are excluded, so the chart only shows capital gains. The dividend yield of the S&P is running near 2%." So, 1.9% above inflation plus 2% dividend yield, plus 2.3% current CPI, plus 2.7% "shadow CPI" (the number is from that article you posted) you get a 9% return. That means that facebook should be worth more, not less (since you are discounting at a lower rate).
- meric 14y agoAlso the dividend payout has not been 2% for all time - back in the 50's it was around 7%. http://www.financialsense.com/contributors/ronald-griess/comparing-historical-bond-yields-to-sp-composite-dividend-and-earnings-yields-is-silver-breaking-out http://www.financialsense.com/contributors/ronald-griess/com...