strong top line, with almost no cost increase, page-36

I like the cash flow too. I think in terms of valuation the market has tended to be quite conservative. For some reason it has traded around the 10X earnings mark despite a demonstrated growth profile. It will all come to naught if earnings fall in a hole of course but I don’t think there have to be big improvements in the business now to attract some multiple growth.

Steve Johnson, who is a fund manager I’m always prepared to listen to, has a great discussion recently about modelling and valuation with Owen Rask (The Australian Investors podcast). In it he talks about anchoring to an old valuation for Enero and not updating to account for growing parts of the business, resulting in trimming his holding too early. I can also admit I have been guilty of that with a number of companies. I never really imagined 25X earnings as being a norm! Fortunately for us though Enero is trading on old world multiples so I think there is a sufficient discount to buy now and check back again at reporting time.