key risk for jbh

The key risk in my opinion for JBH is excessive future earnings growth.

The market has historically justified JBH's share price because of expectations that its future growth rate will be good (not as good as pre GFC, but still good).

Now if the market becomes dissapointed with that earnings growth then the stock will get a PE downrating.

Looking at morningstar's consensus earnings the current expectations are for EPS to grow from 1.08 in 2010 to 1.44 in 2012. Thats 33% EPS growth, which in the current environment could well be unrealistic.

For myself i have my own target buy prices set at a level which does not assume much growth.

If the market forces JBH's share price down to my buy price, then i will have a significant margin of safety, because i wont be relying on previous growth estimates to support my valuation.

From a risk point of view for the underlying business, i am not worried. JBH's business model will mean that it will be the 'last man standing'.

So for me its just a matter of buying at the right price, rather than worrying about whether JBH will still be around in 5 or 10 years time.