Sent: Monday, August 06, 2001 1:32 PM
Subject: Mediocrity = $75/share
To focus on the key issues in the contest for
CA's board, shareholders might ask which candidates are most likely to
raise CA's performance to the standard of its industry average. Put
simply, the value of merely achieving mediocrity is about $75 per share.
Below and in the attached file you'll see a
presentation prepared by Lance Ettus, as a participant in an
Analyst Workshop associated with the CA Forum, comparing the value of CA
to an industry average. Professional comments on the methodolgy will of
course be welcomed. But, more to the point, I'll also welcome comments on
what information shareholders need to decide who they should rely on to
double CA's value.
GL - 8/6/01
Comparisons to Average Valuations
for the
Computer Associates Shareholders Forum
Following is a chart showing how the value of Computer Associates compares
with a widely used industry average. It shows, in essence, that management
which simply matches the average should more than double the value of CA’s
stock.
|
Valuation Ratios |
Computer Associates |
Multex Software & Programming Industry |
| |
|
|
|
Price to Sales (TTM) |
5.35 |
11.00 |
|
Value of CA at ratio |
$35.99 |
$74.00 |
|
CA Achievement/Average |
na |
48.6% |
| |
|
|
|
Price to Book (MRQ) |
3.69 |
8.27 |
|
Value of CA at ratio |
$35.99 |
$80.66 |
|
CA Achievement/Average |
na |
44.6% |
Source of data: Multex/MarketGuide, as of
August 3, 2001
We used price-to-sales and price-to-book as conventionally accepted
valuation standards for the industry. Comparisons of P/E ratios were
considered less meaningful, partly because of CA’s accounting practices.
A review of methodology is available, and comments from workshop
participants will be appreciated.
Prepared August 6, 2001
by
Lance Ettus
(718) 592-0313
|