Ann: CEO Transition Update, page-18

Been reading "Investing for Growth - Terry Smith" recently and was impressed upon by an article which focuses on removing Hype Bias, if you purely look at the numbers would you still prefer to own the stock than sell it. Doing some quick bold numbers with large assumptions (please forgive). I decided to test DSK.

Sales: FY19 86.1mil, FY20 100.8mil, FY21 148.6mil, FY22 138.4mil, FY23 135mil (bottom range forecast). CAGR 12%

EBIT: FY19 6.4mil, FY20 11.8mil, FY21 38.4mil, FY22 26.5mil, FY23 16mil (bottom range forecast). CAGR 26%

ROCE (EBIT/[Tot. Assets - Current Liabilities]) for FY23f 24.6%

Dividend Yield (As per the Prospectus 60-80% NPAT Payout Ratio)
EBIT 16mil - 30% Company Tax = 11.2mil NPAT @ 60% Payout = 6.72mil Dividend (approx half that paid in FY22) / 62.27mil shares = $0.108 Dividend
= 11.7% Yield on $0.90 Share Price!!

Also from the Prospectus Dusk held approximately 22% marketshare of the $460mil TAM which was forecast to grow at 5.8%per annum. Grow that forward to FY23 and that is a $545mil TAM of which DSK has $135mil sales, therefore having grown their marketshare to 25%.

All those very impressive numbers on a stock trading at a FWD PE of 5.2!
Even if EBIT drops further 40% next year (which seems highly unlikely, but possible) it's a FWD PE for FY24 of 8.5.
If you include the 33mil cash FY23 PE = 1.3 and FY24 PE = 1.5 That seems like ALOT of pessimism priced in at the moment.

A further word of valuation EBIT margin decreased to 12%, historically its cash conversion has been over well 100% therefore I feel I can safely assume a like for like cash flow margin. Which gives DSK a Cap Rate in excess of 25%.

I know I know these are mostly historical numbers but I have tried extrapolating FWD with pretty dire assumptions (further decrease in EBIT of 40%).

It may not help anyone sleep at night but it certainly helped put my mind at rest. A would happily buy at this level, even given the poor short term outlook.