"just looking back i sold mine for 44c in 2009!! big mistake not following, but I seem to remember disclosure was pretty minimal - I like to think I have learned a bit more since then also!"@stayer,
Not sure what made you sell in 2009 because they made EPS of about 6cps in that period, which meant you effectively sold on a P/E multiple of something like 7.5 times.
Then again, 2009 was the time of the GFC, so probably a great many micro-cap stocks would have been priced at single P/E multiples, so don't beat yourself up too much, because you would not have been alone in zigging when you should have been zagging.
Predicting the future is hard.
And would could possibly have known that the company's Revenue and Earnings were about to absolutely explode like they did over the next decade?
View attachment 3315092I only started buying shares in SNL in 2017, after that near-parabolic trend in earnings was well underway, and even then I badly under-gauged how strongly the company would perform over the subsequent years.
For most of the companies in which I invest (and even for many that I didn't), as somewhat of a self-improvement audit, I often go back back and re-visit my file notes to compare the expectations I had for a company when I first invested in it (or didn't as the case might be), for the actual outcomes that transpired, to learn where I made my mistakes.
For SNL, specifically, from this post, in February 2017:
https://hotcopper.com.au/posts/22328924/single"Having seen many companies undergoing growing pains such as those experienced by SNL, and then responding like SNL has, tells me that the company is at the start of another 3 or 4 year period of above-average growth (maybe not at the same pace as the 2010/11/12/13/14 period) but still at a healthy enough pace to materially impact the bottom line.Specifically, I suspect the company will - barring the sky falling on our collective economic heads - generate around 7%pa to 8%pa growth in Revenue over the foreseeable future.Meaning that in 3 years' time the company should be generating Revenue of $120m, at an EBIT margin of around 10%, so $12m EBIT (cf. $8.5m this year).Assuming the balance sheet remains as prudently and conservatively geared as it has always been (essentially, free of net debt) then NPAT will be around $8.5m.Applying a not-unreasonable exit P/E multiple between 13 and 14.0 times to that NPAT figure yields a theoretical market capitalisation value for SNL somewhere between $110m to $120m, or $2.70 to $2.80 per share by 2020."So, back in 2017, I was looking for FY2020 Revenue and NPAT to be around $120m and $8.5m, respectively.
What happened instead was FY2020 Revenue of $137m and NPAT of $9.6m (around 13%-15% higher than my expectations).
But that wasn't my biggest mis-forecasting crime.
I had expected a P/E multiple of 13x to 14x.
What happened instead that was the stock re-rated to over 20x P/E (share price of around $4.80 when the FY2020 results were announced, which showed EPS of 23.4c).
So not only was I out by some 15% on my predictions for the "E" (which, incidentally, I don't think is that bad a forecast error over a three-year time frame), but where I was truly deficient is in my assessment of the valuation multiple that the market would ascribe ...in that respect I was out by more than a whopping 50%!
So, the cumulative errors of wrong "E", as well as wrong "P/E", resulted in a $4.80 actual share price instead of my $2.80 price expectation.
That can be described as getting it merely only
directionally correct, and little more.
Like some people say, predicting the future is hard.
.
(20min delay)