Don’t let it get away! Keep track of the stocks that matter to you. Help yourself with the Fool’s FREE and easy new watchlist service today. Click Here Now Though I am definitely a value investing advocate, there are simply times when basic value concepts like fair value and margin of safety fail to provide useful conclusions in analysis. Case in point: the valuation of a fast-growing business like LinkedIn (NYSE: LNKD ) . To illustrate, I’ll attempt to find LinkedIn’s fair value and its margin of safety. Meteoric growth is hard to estimateLinkedIn’s first-quarter revenue increased by 72% from the year-ago quarter. That’s impressive. Yet it presents a serious problem for value investors. Value investors, of course, seek out the intrinsic value of a business. And forecasting growth rates for the business going forward is central to any valuation of an ongoing business. But LinkedIn’s current high growth rates make forecasting the next several years very difficult. High growth rates present investors with extremely high levels of uncertainty. Difficult questions arise: When will the decline in growth rates begin? To what degree will it unfold? The answers to these two questions will drastically affect valuation. Sure, year-over-year revenue growth rates [...]
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