"how can a significant PE premium be put on WOW when credit growth is slowing markedly (especially redraws on home loans which have probably financed the last 5 year binge)? 18 times earnings in this low growth environment...no thanks. Assuming the E holds up of course"
AP,
Long-term, a company's sharemarket performance converges to it's internal ROE. WOW is a high ROE company. It is profitable with respect to the amount of money shreholders need to tip into the business. Therefore a PE of 18 is not a premium for a business such as this.
Even at today's price $23.5 WOW has been averaging Total Shareholder returns of 20+% for well over a decade. That has nothing to do with the market, it is a characteristic of the business, and it rates to continue.
I recommend you bookmark this post and review it once a year. It's a fundamental concept in the stockmarket and one day you will know enough and the penny will drop.
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WOW Price at posting:
0.0¢ Sentiment: None Disclosure: Not Held
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