Subject: Re: Current Price To Peak Book...
One health warning from that exercise:

(other than the obvious one that the future may not resemble the past all that closely)

The table is created from observations of what returns were seen in the past after particular valuation multiples. However, in the past, we saw a lot of situations that above-average valuation multiples were followed by quite low ones within a year or two. Thus, a model based on those observations will come to EXPECT an overshoot to the downside in valuation levels, meaning a quite low one- or two-year price return. Maybe that's pretty typical--after all, valuations have to be below average around half the time--but one would not want to plan one's portfolio on the assumption of an overshoot. It might be more prudent to expect the future to be typical, since there is no way to know if a given future date will be above or below average.

A more "conservative" approach to guessing what happened next would be simply to assume that valuation are average at some point in the future (say, 1.4 times book), and observable value per share grows on trend (say, inflation + 7-8%/year). Picking figures for those two inputs will tell you a fairly plausible (real) price for any future date.

Jim