a brutally candid assessment, page-10

Camden, great work. So the quick summary here would be that Blackmores is buying the illusion of growth by sacrificing their free cash. Most of that sacrifice is showing up as advertising, discounting, promotional, etc.

Where do you think that trend bottoms? Don't returns get whittled down to nothing? Specifically, shouldn't we expect to see net income margins down from 11% now to maybe 3% in 5 to 10 years? It seems to me risky to say that a PE of 15 provides a margin of safety when the cash flow doesn't appear to have a known bottom value yet.

It seems to me that the best valuation technique for a situation like this might be a discounted cash flow, since it is the cash flow that is being impaired here. Valuing against P/E might be quite dangerous since they can manipulate income statement at the expense of cash flows. But faking the impairment to cash flow would be tough.

I am very curious what spreadsheet model you are using that gives you comfort with a P/E under 15. Is that something you can share with us? If you are willing to send it privately, my email is persistentone AT spamarrest.com. I assume you are using a forware P/E here, not a twelve trailing months (TTM) P/E?