Some thoughts from an analyst i know 'Companies with very high levels of profitability (TRS' return on equity was over 60%) can prove to be dangerous investments. Strong profitability invites competition. It is also difficult to maintain such high profitability as the business grows. TRS continues to grow and it is struggling to maintain its high ROE.
Changes in valuation are significant when ROE falls from very high levels. TRS' forecast earnings for 2011 (taking into account the profit warning) still reflect a 50% plus ROE. That's still very good. But the decline from 60% has taken my estimate of value down from $16.50 to around $13.50'.
His reckoning could also be applied to JBH IMO. WOW has ROE of just over 26%. I wonder what it will be in FY11?
the recency effect - an investor's best friend, page-14
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Last
$33.79 |
Change
-0.090(0.27%) |
Mkt cap ! $41.27B | |||
| Open | High | Low | Value | Volume |
| $34.00 | $34.10 | $33.68 | $66.46M | 1.964M |
Buyers (Bids)
| No. | Vol. | Price($) |
|---|---|---|
| 1 | 965 | $33.76 |
Sellers (Offers)
| Price($) | Vol. | No. |
|---|---|---|
| $33.79 | 11715 | 4 |
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| Last trade - 16.10pm 28/06/2024 (20 minute delay) ? |
| WOW (ASX) Chart |