"Previously I think you mentioned around 10 years as a useful...

"Previously I think you mentioned around 10 years as a useful historical time span?"

It really depends on the nature of the company in question.

For a company such as TME, whose financial performance is one of modest-paced secular organic growth, with little in the way of acquisition-driven earnings to muddy the water, 5 years of financial history is likely to be sufficient to define the pedigree.

But for a business whose business cycle has distinctive cyclicality, a review period more like 15 years is likely to be needed in order to fully capture how that business performs at all phases of its business.


"Interestingly your first comment about the importance of organic capital generation is rarely mentioned in the financial media. It seems to me that this is a measure that would encourage an investor into better quality companies with growing predictable earnings."

(Well, organic capital generation is simply a bit of a highfalutin way of saying Free Cash Flow.)

But, good point. You are right, that sort of concept barely rates a mention among the stock market commentariat.

Which is bizarre because if people owned shares in businesses that were not publicly-listed companies, and whose stock prices were not quoted daily, the very thing that those people would presumably think most about, when it came to assessing how much wealth those businesses were creating for their owners, would be growth in earnings and especially growth in free cash flows.

Yet as soon as some squiggles on a share price chart are introduced, all notions of surplus capital generation get discarded.

As I heard someone once say, "The market is an ass."