05-03-2014, 02:46 AM
Fundy,
Damadoran is a well respected finance professor and I agree with what hes written. In fact, his book on valuations, Damadoran on Valuations is why I went into banking in the first place. Anyhow, I digress... My point however is that the issue of size of company needs to be factored into whether or not SBC should be included or excluded. Just like a p/e of 10000000 or negative p/e is not meaningful for a small, fast growing company, I think a company such as NQ, which is still fairly small should not be valued on a gaap eps basis. Its just not a meaningful number, in my opinion. Anyhow, if gaap eps is that big an issue for you, the NQ would not be a very good investment. I'm not familar with tableau, but I would point to twitter or salesforce as examples where sbc is high and gaap eps not considered meaningful. Those are fairly large companies. I'm not suggesting NQ should be on an adj. eps basis when it gets to their size, but what I am suggesting is that at its current size, gaap eps is not meaningful.
Anyhow, its not worth arguing. I can understand why people value on a gaap vs eps basis. I'm just more selective on which companies I apply that rule to. Valuation is more art than science, afterall.
Damadoran is a well respected finance professor and I agree with what hes written. In fact, his book on valuations, Damadoran on Valuations is why I went into banking in the first place. Anyhow, I digress... My point however is that the issue of size of company needs to be factored into whether or not SBC should be included or excluded. Just like a p/e of 10000000 or negative p/e is not meaningful for a small, fast growing company, I think a company such as NQ, which is still fairly small should not be valued on a gaap eps basis. Its just not a meaningful number, in my opinion. Anyhow, if gaap eps is that big an issue for you, the NQ would not be a very good investment. I'm not familar with tableau, but I would point to twitter or salesforce as examples where sbc is high and gaap eps not considered meaningful. Those are fairly large companies. I'm not suggesting NQ should be on an adj. eps basis when it gets to their size, but what I am suggesting is that at its current size, gaap eps is not meaningful.
Anyhow, its not worth arguing. I can understand why people value on a gaap vs eps basis. I'm just more selective on which companies I apply that rule to. Valuation is more art than science, afterall.