China Finance Online Co. (ADR) (JRJC)

TMFDitty (98.67) Submitted: 6/04/08 12:03 AM : Start Price: $22.89 JRJC Score: -28.86

Based on the most recent results, I get $21.2 million in FCF for the past nine months. That works out to a run-rate of just under $28.3 million, and a probable price-to-free cash flow ratio of 17.


Now, no analysts are on record with 5-year predictions for growth. Really, there's just one guy out there, spitballing a 120% growth prediction for next year. But here's the thing. Take that analyst's prediction of $1.61 per share next year, but assume it takes not one, but five years for CFO to get there. Want to guess what that works out to?


That's right: 17% compound annual growth. Meaning CFO is fairly priced (P/FCF/G = 1.0) if it takes five years to hit next year's target, or if it hits it, then flatlines for the next four years. Either way, this looks like a pretty wide margin of safety.

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