Ann: Quarterly Report December 2019, page-55

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Calvo

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07/02/20

18:46

Post #: 42809986
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Originally posted by option5 ↑

"Cash flow per share is forecasted at 38c which makes it 7x.. thats the type of valuation you see in companies after GFC.. "

I completely agree that cashflow is certainly an important element in assessing a business.

Low cashflow = slow (or fast) death for any company.

Although I've always felt that the converse is not necessarily true (e.g high cash flow = great company).

I really think the profit on that cashflow needs to be assessed carefully.

For example I could start a business selling $100 dollar bills for $50.

My "cashflow" will be great, and likely growing very fast.

However my profit, likely dividends and long term survival as a business will not be not so promising.

So my question is S32 making a decent or even any profit on all the stuff it sells given (relatively) fixed costs and decreasing prices?

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You are referring to operating profit (EBIT)/ Revenue = Operating Margin
and ROA = Net Profit/Assets

Both are at half way point to be a top tier company and be in the BHP league

Having Operating Margin > 25% and ROA > 10% is the sweet spot

But BHP doesnt have the low level valuation that S32 has. We will see in the interim report as offloading South African coal assets will diminish capital intensity although lower revenue... we will see

Last edited by Calvo: 07/02/20

S32 Price at posting: $2.62 Sentiment: Hold Disclosure: Held
2 Upvote

0 Great analysis

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