I think we both agree that on any basis BGL is currently...

I think we both agree that on any basis BGL is currently undervalued and represents good buying at the moment.

Absolutely, while not as optimistic on earnings I am more optimistic on valuation. Based on NPAT of $4m in FY12 I value the stock around 40c.

Here is the essential point about P/E ratios taken from a Clime Capital newsletter some years ago

"if Ben Graham and Buffett are right when they say, 'Price is what you pay and value is what you get', that means that price and value are two very different things and the key to successful investing is to buy assets for less than they are worth. So how can a model produce a 'value' when one of its inputs is 'price'? Such a model is simply misguided and will misguide its users."


The P/E ratio does not determine whether a share investment represents good value. A company with a P/E of 30 can be cheaper than a company with a P/E of 10, if investors don't understand this and use PE's as a basis for investing, then they should expect to be disappointed.

It is also not terribly useful to compare the PE's of company's in the same peer group. Without a comparison of the underlying economics of the business, more specifically the rate of return on equity, the level of reinvestment and the rate of payout in terms of dividends then P/E comparisons are an exercise in futility.