dose sales - sensitivity analysis, page-7

Works out pretty dam well.

Man that Graham guy is a genius.

Discuss the excel below image.




EXCEL SET UP:

1. top table just dose sales, revenue and earnings as reported in its AR. I did the growth rates.

Graham's shorthand formula, as discussed in The Intelligent Invesetor (p.189, can't remember the edition top of head)...

EV = E * (8.5 +2g)

Follow that exact formula, I simply plug in the reported earnings as E, g is the growth rate for dose sales, revenues, profit - as in the column.

Worked out the entire enterprise value first (shown in the third table in $M); then get the per share figures on the diluted shares outstanding as reported in its AR. This ps is shown in table 2.

--- Finally, the approx. market price columns at the end of each table 2, and 3 are the company's share price as shown on google finance price chart.

Note I haven't check whether it's adjusted etc... and was eyeballing the price range for the financial year [July to June].

That price selection isn't ideal since the reported earnings for a given year is taken at end of June, but the report is release around july or august. Would be better to shift the market price at least a couple of months when the report is released and the CEO give a presentation so the smart money can see what's happening, haha... you guys know what I mean right?


Seems the market generally just take the reported dosage growth, plug a couple of figures around that rate because they're "forecasting" the future right? They'd do the same scenario for the reported earnings... it goes into those cash flow modelling and out the valuation estimate.

Or you can just use Graham's formula, which if I say so myself, I have actually put to pretty good use to understand market sentiment, ahem...


As to how to go about valuing SRX or any given company using Graham's rule of thumb... as replied to another member above... More sensible to study the company, its financial position, its possible future earning power... then the g is its approximate p.a. growth rate for the next 7 to 10 years.

This does not mean you can forecast what the market is thinking, or know the share price... But I personally find it extremely helpful to know what the market is saying with any given price and whether or not they're too optimistic or too pessimistic.

For instance... SRX current price at the moment, around the $12 mark... implies, from memory... market expectation of earnings growth by about 3% p.a. for a decade.

Is that reasonable? I don't think it is.