sex.com - your final exam in valuation.

[Sportacle]

Originally posted by options

You can have very profitable company and still negative cash flow.
Profit is that what matters in this case.

Sure, if you are dumping all your c/f into R&D. But, in the end, DCF, P/E, P/S, etc.. should theoretically give you a similar value of the company. Since, as long as your R&D cash outflows are creating NPV postive projects then you are always adding value.

I think the best way to put my valuation of sex.com into perspective is that if I were to want to buy the domain sex.com I would first care about whether or not it will generate more cash inflow than outflow. I assume this to be true, as server costs + domain reg expense + my time < fees from adult site sign up commissions. Now, how much would I pay for those future sign up fees? Well, I sure as heck won't pay dollar for dollar for the estimated signups in the future. I am not looking to get my money back over a period of time, I want some ROI. Thus I discount them (by some risk rate greater than investing in nice ol' safe GOV bonds).

Or, as George pointed out, I may use M&M (applying some Black-Scholes) to value the embedded option if the cash flows are not positive right now. Either way, value should be in expected cash flows. I am not sure why you disagree with cash flow and like profit. Profit is an accounting term, and you can make a company look profitable in countless ways (while it burns cash).

I may have brought this thread down the wrong path, I apologize. I just wanted to bring a simple model into play that enables other people to see how they may (or may not) value an asset.

I enjoy the debate and thank you 'options', for at least taking the time to read my posts.

 

[options]

Originally posted by Sportacle
I am not sure why you disagree with cash flow and like profit. Profit is an accounting term, and you can make a company look profitable in countless ways (while it burns cash).

Even more you can have c/f look very weird.
As I said earlier I don't like applying equity momentum models (using c/f) on non-equity deals, that's all.

I may have brought this thread down the wrong path, I apologize. I just wanted to bring a simple model into play that enables other people to see how they may (or may not) value an asset.

You made grounded and right comments.
Your posts are actualy the ones, the original thread starter wanted to hear, I guess.

 

[options]

Originally posted by options


Even more you can have c/f look very weird.
As I said earlier I don't like applying equity momentum models (using c/f) on non-equity deals, that's all.



You made grounded and right comments.
Your posts are actualy the ones, the original thread starter wanted to hear, I guess.

 

[options]

What's going on here?:weird: