dose sales - sensitivity analysis, page-5

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cafa

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15/06/17

21:35

Post #: 25304622
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Originally posted by danginvestor ↑

It's not that straight forward, no.

Depends on the company, not all sales growth trickle down to the same earnings growth. SRX, having no debt, high margin... its earnings might even be better than sales growth... BUT...

That formula from Ben Graham does provide a good guideline into what the market think and implied.

If you read up on what Graham said and compare to the sample I put up there - simply plugging in the latest reported earnings with management's estimated sales growth - is not what Graham recommended, and it's not how I would value a company either... BUT history shows the market price tend to just do what I did up there most of the time.

So to get a more accurate estimate, rule of thumb, valuation... you'd study SRX proper and do its earning power estimate [this is often not what they report as their net profit]... plug in what you think its average earnings growth per year over the next 7 to 10 years would be [earnings growth is not last year's sales growth either, it's average earnings growth p.a. into the future].

But yea, it works pretty well in giving an investor some insight into what the market mean when they priced SRX, or any stock.

Let me take a look back at SRX's sales estimates over the years to see if the market approximate what the model reckon it does.

Expand

Dang, for the benefit of whose who may not have seen the analysis. may I suggest you cut and paste the area of interest, less the logo?

SRX Price at posting: $12.50 Sentiment: Buy Disclosure: Held
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dose sales - sensitivity analysis, page-5

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