do you have one of those nice charts showing the historical pe...

First 22 Last

Share
Profile

Follow
Just_a_guy

5,420 Posts.

298

15/08/19

12:48

Post #: 40002673
Share

Originally posted by madamswer: ↑

"prospective ev/ebit approaching 10.
For a company like this, where would you see a fair range in valuation?
Ev/ebit of 13-16? "

@Just_a_guy,

I do like EV/EBIT as a measure of valuation, although it is not part of the common investing world vernacular.

The reason I like it is because it is a proxy for Pre-Tax Free Cash Flow Yield on Enterprise Value (akin to a private equity-style buyout multiple).

As you say, GUD's current EV/EBIT is a little over 10x currently, which corresponds to FCF Yield of around 10%. That's around 800bps to 900bps in excess of the available average returns from risk-free investments.

Given the company's above-average financial pedigree and long successful financial history of GUD, the resonance of its brands, the quality of its management and the growth optionality via acquisitions, I'd happily consider fair value to be represented by a FCF Yield of 500bp or 600bp above a risk-free rate, i.e. a 6% or 7% FCF Yield.

Which equates to an EV/EBIT multiple starting at 14x.
And corresponds to a share price of $13.50.

.

Expand

do you have one of those nice charts showing the historical pe and or ev/ebit ratios for gud?

Looks like it it might have briefly touched a pe lower than current levels in 2015 and 16 but would be interesting to see the variability and average of its readily available and quick for you.

Thanks

GUD Price at posting: $8.69 Sentiment: Buy Disclosure: Held
1 Upvote

0 Great analysis

Reply