Thank you for your well considered comments. The timeframe and...

Thank you for your well considered comments.

The timeframe and the CAGR really matters. While SDI looks like a 'steady boring compounder', the growth rates vary substantially depending on the starting point and end point. I was surprised by this actually. So if I use EPS as you have, I prefer to use FY20's EPS of 2.85c as a base because of Covid impacted FY21 and LTM. Looking at the returns on that basis:

• 11% since '06;
• 24% since '10;
• 40% since '11;
• 25% since '15;
• 12% since '16;
• 9% since '17; and
• -21% since '18

The other challenge I had with valuing SDI was the free cash flow. I prefer this to earnings anyway. It's been growing decently over a long period, and I am more than happy to remove the dips from currency / crisis issues. But you can also see a big discrepancy between cash from operations and free cash flow - there's a lot of depreciation to cover, which the earnings don't illuminate. On this basis, the FCF yield is around 7% to my mind.



The net equity you mention is around $80m. Or put another way, the tangible book value per share is around 60c - that's a long way from today's share price. And if you consider the past 15years growth from 23c in 2006, it's been growing at 6.6% CAGR. Personally, I doubt that this will increase to ~$1.65 by FY23.

I think the 6-7% CAGR from here is the historic average, plus ~3% dividend yield. There could be some share buy backs or new acquisitions - they have to do something with the increasing cash balance eventually. And from a risk perspective, I think to the downside it's about margin compression, and to the upside it's about FOREX improvements and new product development.

I wrote more about it on FinTwit and there was some good discussion around it. I definitely think this is not a bad investment, and just trying to get my head around a good entry point and a fair estimate of future returns. Really appreciate your feedback and inputs.