charts looking interesting, page-4

fundamentally, we may have to wait till the interim results come out in a few weeks to c what will happen

Maybe thats why the share is stalled at these levels

If they come with an EPS of circa 48-50 cents per share and a good outlook re their acquisitions being EPS positive with minimal integration problems and large scope for growth in these businesses, i think the share price will sail back up to the previous highs purely based on positive sentiment and momentum

Remember, the management has acheived high returns on equity in the past when they took over or after they took over other businesses

With debt involved, this would assume that management will be able to acheive high returns on the debt (given the previous record of good returns on equity and good returns on debt)

The return on assets or the return on capital employed will thus look good in the future based on historical performance of the management.

*** Maybe with interest rates being touted to go up in the US in the future, this has put a strain on all stocks that have a large amount of long term debt that needs at some point to be re-financed in the future??? I.e interest rates look to have maybe bottomed out???

I know that RHC (RAMSEY HEALTHCARE) has sufferred recently maybe due to the fact that it has massive long term debt and the interest rate cycle seems to have bottommed. They have very strong cash-flow interest cover though and much of the earnings are very sure and stable as they are in healthcare which is very defensive in nature. Thats why thyey can afford to have high debt ala Coca-cola or Fosters or Lion nathan. Earnings are stable and return on equity and return on debt is good.

TOL is one of the better companys performance wise and management wise on the ASX, so it can afford a high PE. Management is proven and management make or break a company. So far, theyve acquired a heap of businesses in the past and integrated them well, with high ROE and decent return on assets or return on capital employed considering the debt.

EPS of 50cents at a historic PE of 15 at least is acheivable, hence a $7.50 price. Looking into the future, if EPS for 2009/10 is say 55, then the valuation over time can get higher than $7.50