My post this morning on price erosion hasn't sparked much debate just yet.
hopefully it will soon.
However, it did prompt me to go back and look at mattkid's valuation of Fonda. . . . .and I note that he has assumed that DRR's costs are a constant 42% of sales.
I strongly believe this is a simplification that could lead you to grossly overestimate future revenue to ACL.
The percentage of sales that DRR's costs represent is impacted massively by the sales price achieved.
If the arrival of the AG really has led to 50% price erosion. . . . .then ACL's current market cap represents a generous valuation of Fonda.
SOrry to say it, but it does.
SO then I ask. . . . how confident are we around the level of price erosion????> This is absolutely key now.
My post this morning on price erosion hasn't sparked much debate...
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