funtastic, page-13

re: funtastic-be careful - for ac Peter,

A couple of questions re your posts:

You mentioned: "The primary assumptions were beta of 0.5 (half the all-ords and not a growth beta at all), and earnings figures of 131 (02), 164 (03) - ~25% growth, and 190 (04) - ~17% growth)".

I would appreciate your comment on the beta value. My impression of beta is that it is a measure of volatility against the rest of the market. The market beta is 1. For FUN to have a beta of 0.5 merely suggests it has low price volatility. Can you comment what the issue of growth has to do with the concept of Beta?

I presume you are using Beta to generate a WACC for the DCF calculation?

A second point is that FUN stated some months ago that they are targeting revenue of $300 million within two years. This appears to much higher than your own assumptions? (Of course whether they achieve it is a moot point, however they have been achievers so far)

To be honest to say that a stock with the high growth rate of FUN and a P/E of 12 is overvalued is a little hard to digest. One of the valuation methods using the future maintaninable earnings concept is the simple PE ratio. From a sector perspective and growth perspective a P/E is not overvalued.....?

And one of the criticisms of doind a DCF on cashflows is that it is highly sensitive to the assumptions made, in particular for high growth stocks. Its not exactly steady state stuff.

Dont get the wrong impression, I am certainly not challenging your statements as I am aware of your knowledge. Just seeking higher understanding of the concepts.


cheers
AC