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I regressed 200 companies with a negative earning. My goal in this
regression was to attempt to predict the market capitalization of these
companies by using 7 variables. I found out that, in general,
distressed companies are harder to value than profitable companies.
The R^2 for all companies in the S&P 500 (some of which do not earn a
proft) is 0.87 when using 5 variables. For distressed companies, this
value is about 0.78.
The variables that I regressed the market capitalization against are:
x1 earnings 0.3637
x2 book value 0.7029
x3 sales 0.2229
x4 debt 0.1636
x5 cash 0.3074
x6 assets 0.4809
x7 next year's PE 0.2023
When using all the variables, the R^2 is 0.78.
draccarlawpet wrote on 12/14/06 7:29 PM:
> I regressed 200 companies with a negative earning. My goal in this
> regression was to attempt to predict the market capitalization of these
> companies by using 7 variables. I found out that, in general,
> distressed companies are harder to value than profitable companies.
> The R^2 for all companies in the S&P 500 (some of which do not earn a
> proft) is 0.87 when using 5 variables. For distressed companies, this
> value is about 0.78.
>
> The variables that I regressed the market capitalization against are:
> x1 earnings 0.3637
> x2 book value 0.7029
> x3 sales 0.2229
> x4 debt 0.1636
> x5 cash 0.3074
> x6 assets 0.4809
> x7 next year's PE 0.2023
>
> When using all the variables, the R^2 is 0.78.
Fascinating!!!
"Blash" <b...@c...net> wrote in message
news:C1A75807.51E9C%blash1@comcast.net...
> draccarlawpet wrote on 12/14/06 7:29 PM:
>
>> I regressed 200 companies with a negative earning. My goal in this
>> regression was to attempt to predict the market capitalization of these
>> companies by using 7 variables. I found out that, in general,
>> distressed companies are harder to value than profitable companies.
>> The R^2 for all companies in the S&P 500 (some of which do not earn a
>> proft) is 0.87 when using 5 variables. For distressed companies, this
>> value is about 0.78.
>>
>> The variables that I regressed the market capitalization against are:
>> x1 earnings 0.3637
>> x2 book value 0.7029
>> x3 sales 0.2229
>> x4 debt 0.1636
>> x5 cash 0.3074
>> x6 assets 0.4809
>> x7 next year's PE 0.2023
>>
>> When using all the variables, the R^2 is 0.78.
>
> Fascinating!!!
>
what is your sigma on the 0.78 ?
DmitryKovtun wrote on 12/14/06 9:34 PM:
>
> "Blash" <b...@c...net> wrote in message
> news:C1A75807.51E9C%blash1@comcast.net...
>> draccarlawpet wrote on 12/14/06 7:29 PM:
>>
>>> I regressed 200 companies with a negative earning. My goal in this
>>> regression was to attempt to predict the market capitalization of these
>>> companies by using 7 variables. I found out that, in general,
>>> distressed companies are harder to value than profitable companies.
>>> The R^2 for all companies in the S&P 500 (some of which do not earn a
>>> proft) is 0.87 when using 5 variables. For distressed companies, this
>>> value is about 0.78.
>>>
>>> The variables that I regressed the market capitalization against are:
>>> x1 earnings 0.3637
>>> x2 book value 0.7029
>>> x3 sales 0.2229
>>> x4 debt 0.1636
>>> x5 cash 0.3074
>>> x6 assets 0.4809
>>> x7 next year's PE 0.2023
>>>
>>> When using all the variables, the R^2 is 0.78.
>>
>> Fascinating!!!
>>
>
> what is your sigma on the 0.78 ?
>
>
As many of these figures can be arrived at in various ways, I consider the
whole exercise a useless waste.....
i.e. assets-they are carried at market value or cost, whichever is
lower-without having a complete audit to value every asset of every company
by the same method, you're comparing apples to oranges to lollipops......
i.e. sales-are they booked when the contract is signed or when the cash is
handed over....
i.e. next year's PE-is this figured using a crystal ball or a ouija board???
i.e. book value-how do assess the true value(if any) of Goodwill???
Bottom line----This type of work is no more than mental masturbation by
people who have NO practical knowledge of stocks.......
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