"EPS in 2019 was $1.22 so $1.35 in 2024 is not startling" Beware...

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madamswer

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16/04/24

23:31

Post #: 73377074
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Originally posted by gragou02 ↑

In their recent half yearly report, management offered 2024 FY EBITDA guidance between $1.7b and $1.8b and then further qualified that prediction by stating that the profit would be "more likely towards lower end of guidance range".

When I build a result using $1.7b as the EBITDA for the 2024 financial year I worked up a Profit before Tax of $886m and, after applying a tax rate of 27%, again from their half yearly report, I suspect that EPS may settle around $1.30 to $1.35 for the current financial year.
A share price of $26.50 suggests a P/E ratio of about 19 to 20 which is the maximum I would pay for this business.

Much of their growth comes through acquisition funded by external debt, and, because these acquisitions occur regularly, it's hard to determine the real organic growth rate of the business, but I've come up with estimates over time of about 5 to 6% (EPS in 2019 was $1.22 so $1.35 in 2024 is not startling - ROE across the last 10 years has stuck around 10% with the exception of the Covid years of course).

I bought back in today but only in a small way as I'm not convinced that they'll achieve their stated profit guidance for 2024.
We'll see.

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"EPS in 2019 was $1.22 so $1.35 in 2024 is not startling"

Beware of using the reported number sans any scrubbing out of the abnormals.

FY2019's figure included a $50m gain (equivalent to 8.6cps, after-tax) on an asset sale.
Also, the tax rate was pretty light-on in that year (23%), equivalent to a further 6cps benefit.

So, I believe the more representative FY2019 starting point is more like 107 cps.

Which, based on my FY2025 EPS expectation of 140-145cps, implies a CAGR of 5%pa over that period.

Admittedly nothing spectacular, but at least inflation-beating.

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SHL Price at posting: $26.47 Sentiment: None Disclosure: Not Held
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0 Great analysis

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