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What You See and What You Get

July 27, 2007

Legg Mason's Chief Strategiest Michael J. Mauboussin discussses why cashflow is more important than earnings: "Cash is a fact, profit is an opinion."

• A company’s value equals the present value of future cash flows.

• While convenient, earnings provide limited information about future cash flows.

• Our analysis of the DJIA suggests cash flows remain very healthy.

• The ongoing shift to an intangible-based economy renders earnings even less

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Rating: 2.8/5 (8 votes)

Comments

billytickets
Billytickets - 7 years ago
This was ok Every value investor knows that cash flow subtracted by capital spending per share which is given on value line is more"important" than earnings themselves.In my book I just use PE because my companies have strong ROE's and generally that means that they are not "captial intensive".peace

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