Having established that the company has a high business and management quality. The final step is to determine whether the price is cheap enough to justify a market entry.
It is this process that I find the hardest to execute.
The author does initially seem to employ a simple metric to determine whether the entry is worthwhile. He starts with the earnings yield numbers which is 1 divided by the PE ratio of the company.
But it is the next step that resembles sorcery more than science.
As tech companies invest in a lot of R&D, it is entirely possible that earnings after deduction for R&D will be low, so the analyst would have to moderate the earning yields. So the company may have an earnings yield of just 2%, but a smaller company in the same space may have less R&D and were able to conduct their business comfortably at an earnings yield...