One can make many seemingly intelligent comments, like not being...

One can make many seemingly intelligent comments, like not being sure how the price of iron ore is going to behave, but having held NWH for many years, I simply use the EPS multiple approach, because there are a myriad of considerations on which one could comment that are just as important as the future iron ore price. Considering many of these considerations inclines me to suggest an EPS multiple of 15 . Using EPS = $0.273, that gives $4.10.

Multiplier
10   $2.73
11   $3.00
12 $3.28
13 $3.55
14 $3.82
15 $4.10

As usual, HC stuffs up metrics and things that I have gone to some effort to insert, above. There is not enough time to fix the problem.

NWH has earned a multiple of 15 in my book, so I have no problem with $4 – a round number to convey that is the guesstimate of a fallible being. On a good-enough-is-good-enough-for-me basis, $4. is where I would leave the 12-month target, for now.

The EPS is going to transpire to be higher or lower, and my bias is towards “higher”. There comes a time in the financial year when investors start thinking more about FY2's EPS. Whether they mentally raise the EPS or the multiplier when more positive news comes to hand, the effect is the same – a higher target price may well emerge in FY25 if the NWH story improves.

There is leeway for management to change its style in respect of retained earnings. Management can decide to grow modestly, and increase the payout ratio, because growing too big introduces its own problems, one being complexity, and another the tendency for self-serving bureaucracies to emerge.

In my view, share dilution should be reigned in to focus on EPS, not total revenue. For all its progress, NWH is now looking at an EPS that it had many years ago. Next time the SP drops to stupidly low prices, Management could, if it had the funds, buy shares and cancel them, but they won' if their remuneration packages are based on total metrics rather than per-share metrics. I have not looked at Management's remuneration packages for years, but I would be surprised if they aligned 100% with shareholders' best interests.

These considerations and others, form the myriad of things that influence setting an EPS multiplier – its an art, not a science.