ALTERA CORP (ALTR) 19.77 -$0.17 (-0.85%) 10:04PM (15 mins delay)

S&P 500's Top Decile Economic Margin Companies

Jun 16, 2009 - 9:02 AM EDT

Value Expectations submits:

Traditional Discounted Cash Flow ((DCF)) models have been been underutilized in equity analysis over the years primarily because of the assumptions one has to sign off on. We will concentrate on just two of the major issues we have with traditional DCF models, the lack of ability to deal with competition and the perpetuity assumption embedded in a DCF model. These assumptions lead to irrational calculations of intrinsic value and force analysts to make compromising decisions in their model building efforts.

AFG uses a modified DCF model that accurately addresses the competitive nature of the business while also dealing with the perpetuity issue through our Economic Margin decay or competitive advantage period.

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Source: Seeking Alpha (Jun 16, 2009 - 9:02 AM EDT)