this is just a example of how I work out true value for a company, and if said company is trading at fair value or well under that.
BRK is this example
if you factor in the current income being produced of $2.5 million AUS a year
and you divide the current MC ( 15 million) by that you get a PE ratio of 6.
a PE ratio of most incoming producing company's is around 20, anything under 10 is
considered extremely cheap.
but the thing is most company's that are producing a income are service based and have no real hard assets for the company, most are leasing buildings and rely on a service for income exchange.
the great thing about BRK is that not only is it now producing a income but also have hard assets in land that have more than tripled in value since they have purchased them.
so then what if you combine BRK land value by their income value?
so if you combine the two very conservative numbers.
land value of (1780 acres x 16k an acre = 28 million)
then you add a income PE ratio value of 6 (2.5 million x 6 = 15 million)
you would get a combined value of income and hard assets for BRK of 43 million
or a SP of around 6 cents
now if you take the potential upside into account maintaining the same conservative approach and the same acre amount but giving the current true value of 19k per acre and anticipating the 300% increase in wells to come, from 300 barrels a day to 1000 barrels a day you get a much higher valuation for BRK
you get a increase from 2 million USD to 6.6 million USD or (8.5 million AUS)
- Land value 1780 acres x 19k = 33 million
- income value, using PE of 6 again
8.5 million x PE of 6 = 51 million
total 84 million combined value or MC, again very conservative numbers, as one would expect a increase of acreage held ( BRK recently increase their acreage 500 acres in two months)
and increase in land value, also a PE of 6 is very low, were a PE of 20 is the standard practice imo.
if you use optimistic numbers you get into some very big numbers, (14 bagger)
- land value, 2000 acres @ 20k an acre = 40 million
- income value, 8.5 million using a common PE ratio of 20
= 170 million
total value 210 million MC
longer term it could get even better imagine a land value of 100k an acre and increase production of 1500 barrels a day, mind blowing figures.
# just some raw figures guys showing the massive upside here, feel free to comment or improve on my calculations.
(20min delay)