only long term value if they can grow their ROE significantly above 12-13%.
Their book value is $2.53, the share price is $4.25
Therefore by buying the shares at todays share price of $4.25 price you are paying nearly a 70% premium to generate a return of 12-13%.
Or thinking anotherway, at a share price of $4.25 you are not going to receive a return on your share price investment of 12-13% (excluding the share price movement up or down), you are only going to receive a return of 12%x 0.6 (the inverse of premium of 70%) = 7.2% on invested capital (my invested capital being the price I paid for the shares or $4.25)
Whilst not bad, its nothing to get excited about.
Hence why I am back on the sidelines. Especially as this is a 'medium target', it is not management forecast.
IAG Price at posting:
$4.24 Sentiment: None Disclosure: Not Held
A personalised tool to help users track selected stocks. Delivering real-time notifications on price updates, announcements, and performance stats on each to help make informed investment decisions.
(20min delay)