Its tough making predictions about Covid and consumer milk habits. I tend to focus on what's already happened and use that as a reference point. Before Covid A2M did 50 cents a share for the FY 2020. If you assume that result and return 10 years worth of earnings to investors its $4.49 using a 2% discount rate (no need to use a hurdle rate above the rate of inflation). I would also add the book value given this is a company that can do 30% ROE. 1.43 + 4.49 gives $5.92 which is a present value covering 76% of the current share price.
However A2M doesn't doesn't return money to investors & has high ROE's of 30%, & over the next 10 years it certainly has the potential to increase EPS above 50 cents a share whilst retaining those profits and compounding earnings. This is true even if the rapid growth story is over & it starts paying out dividends.
Of course earnings could go lower than 50 cents. At 0.25 cents a share you get current PE ratio of 30 (which isn't atrocious given the some valuation multiples). However when A2M did 25 cents a share in 2018 it did on on the back of 500 million shareholder equity. Currently the shareholder equity is a little over a billion.
5.92 is my current estimation assuming NO GROWTH & discounting the COVID disruption. Just ask yourself, what's more likely, losing 50% and seeing it go to just over $3, or the stock bouncing back to $15 returning 100%.
Who knows what's happening with Covid and milk consumption & if management can execute strategy. All you can do is put the odds on your side & I think at these prices A2M offers opportunity. I posted before I would buy at 7.5. However given I think a 50-100% gain is possible over the next 3 years I might just buy at market within the next two weeks.
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Last
$6.25 |
Change
0.510(8.89%) |
Mkt cap ! $4.525B |
Open | High | Low | Value | Volume |
$6.24 | $6.77 | $6.05 | $29.65M | 4.654M |
Buyers (Bids)
No. | Vol. | Price($) |
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1 | 152106 | $6.56 |
Sellers (Offers)
Price($) | Vol. | No. |
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$6.00 | 370 | 1 |
View Market Depth
No. | Vol. | Price($) |
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1 | 176 | 6.500 |
1 | 78 | 6.370 |
1 | 620 | 6.300 |
1 | 158 | 6.250 |
2 | 1430 | 6.240 |
Price($) | Vol. | No. |
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6.000 | 370 | 1 |
6.130 | 800 | 1 |
6.180 | 2000 | 1 |
6.200 | 9360 | 3 |
6.230 | 90 | 1 |
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