How to calculate Return on Equity?

[jke_brown]

Snoopy I guess the next thing to work out is the intrinsic value.
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from http://en.wikipedia.org/wiki/Benjamin_Graham_formula

The Graham formula proposes to calculate a company’s intrinsic value V* as:

V: Intrinsic Value
EPS: the company’s last 12-month earnings per share
8.5: the constant represents the appropriate P-E ratio for a no-growth company as proposed by Graham
g: the company’s long-term (five years) earnings growth estimate
4.4: the average yield of high-grade corporate bonds in 1962, when this model was introduced
Y: the current yield on AAA corporate bonds

To apply this approach to a buy-sell decision, each company’s relative Graham value (RGV) can be determined by dividing the stock’s intrinsic value V* by its current price P:

An RGV of less than one indicates an overvalued stock and should not be bought, while an RGV of greater than one indicates an undervalued stock and should be bought.
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so again with telecom nz

g: the company’s long-term (five years) earnings growth estimate= 2007 ernings -2003 ernings / 5=8%

from http://www.nzx.com/market/debt_summaries
4.4: the average yield of high-grade corporate bonds in 2007= 8.61
Y: the current yield on AAA corporate bonds= 8.56

so then we have...

2001	2002	2003	2004	2005	2006	2007		
643	-188	704	775	806	2656	3024	Net profit after taxes	
614	670	709	775	806	820	955	Adjusted net earnings	
5403	5537	5199	5360	5605	5555	5582	Operating Revenue	
7421	7500	7755	8246	8972	6203	8276	Total assets	
2003	1328	1776	2617	2612	1062	3604	Total Equity	
								
30.65	50.45	39.92	29.61	30.86	77.21	26.50	ROE (du point)	
32.10	-14.16	39.64	29.61	30.86	250.09	83.91	ROE	
								
0.364	-0.101	0.376	0.392	0.47	0.22	1.58	EPS	
0.08	0.08	0.08	0.08	0.08	0.08	0.08	g	
8.56	8.56	8.56	8.56	8.56	8.56	8.56	y	
8.61	8.61	8.61	8.61	8.61	8.61	8.61	4.4	
								
3.17	-0.88	3.28	3.41	4.09	1.92	13.76	V	
4.17	4.66	4.93	5.67	5.92	4.35	4.47	Share Price (01 sep)	
								
0.760	-0.189	0.664	0.602	0.692	0.441	3.079	RGV

I am not sure how accurate this method is, but I guess it gives a relative valuation that one can compare against the share price and ROE.

What other methods available to do similar valuation?