From: Long Investing Ideas from Seeking Alpha - 12:57pm - August 29, 2012By David Trainer:My previous recommendation was new to the value investing club (see "Buy CSCO: A Treat For Value Investors"). This week, I bring back a classic value stock -- Phillip Morris (PM). Focusing on the reported GAAP earnings of PM leads investors down the wrong path. Too many of my peers get lost in debt ratios, quick ratios, and price-to-earnings ratios. These analyses miss the mark and do not capture the strength of PM's underlying cash flows. I recommend investors arbitrage the market's disconnect in valuing PM based on GAAP earnings instead of its true economic earnings. My model shows that the market's expectations for PM's future cash flows are lower than the consensus estimates for GAAP earnings. I believe this disconnect arises from the difference between PM's GAAP earnings and economic earnings. Figure 1 below shows how PM's economic earnings over the past tw...
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Source: http://ewallstreeter.com/phillip-morris-a-value-investing-classic-3826/
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