Yes, $8.00/share doesn't look at all demanding: yesterday's update equates to EPS of 90c, so a P/E multiple of just 9x.
Moreover, I think the year-end balance sheet will show some $3.0m in Net Cash (equivalent to 25cps), so the P/E multiple is a conservative way to value the company.
The current valuation multiple is probably appropriate if the demand cycle suddenly rolls over next year, but there is scant sign of anything remotely like that happening.
Some contextual graphics:
View attachment 5346580This cycle is bringing forth record levels of profitability, which I strongly suspect is an outworking of the exiting of competition from the severe economic slump between 2015-2018.
Korvest clearly survived and today enjoys more pricing power as a result of the less competitive environment.
But with the ROEs now in the mid-20%, that will ultimately attract new participants. Not imminently, because it takes time, but in a few years' time (probably arriving just as the cycle rolls over, if history is any guide).
View attachment 5346796It is therefore important that Korvest management don't waste these good years; they need to use the elevated levels of profitability to reinvest in continuous business efficiency and cost reductions, so that the company can continue to take on all comers and win.
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