That's 50% gain within 5 years. Not me saying :)

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lannisterjunior

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31/10/19

10:43

Post #: 41166139
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Originally posted by FraserJC: ↑
Ok, so some people here seem to think that I only understand value investing.That's absolutely incorrect. I've successfully invested in many early stage firms, and have also been an entrepreneur myself for over 20 years. But, more importantly, its also not relevant here.

What is relevant is that, at some stage in a stock's life, the market will begin to value it using PE ratios (or some other common indicator of fundamental value) because it will only be willing to value something on the basis of promised growth for so long before it demands profits to justify the market cap.

So, what might a fair price for this stock look like in future based on potential future earnings?

The table below provides an illustration based on APT. It assumes that profit in the next FY is $75 million, and that this grows by $50 million per annum thereafter. It also assumes a starting PE value of 100, which declines over time as the company matures. This is basically how the valuation of nearly every growth stock generally evolves.

The following table plots the implied market cap and Share Price for these assumptions. As this shows, it will be difficult to reach a Share Price of $166 unless APT somehow manage to earn profits of well over $1 billion per annum.

Year Profit $m Shares m PE Ratio Market Cap $m Share Price
1 FY2020 $75 253 100 $7,500 $29.64
2 FY2021 $125 253 80 $10,000 $39.53
3 FY2023 $175 253 60 $10,500 $41.50
4 FY2024 $225 253 50 $11,250 $44.47
5 FY2025 $275 253 40 $11,000 $43.48
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That's 50% gain within 5 years. Not me saying

APT Price at posting: $28.55 Sentiment: Buy Disclosure: Held
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0 Great analysis

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	Year	Profit $m	Shares m	PE Ratio	Market Cap $m	Share Price
1	FY2020	$75	253	100	$7,500	$29.64
2	FY2021	$125	253	80	$10,000	$39.53
3	FY2023	$175	253	60	$10,500	$41.50
4	FY2024	$225	253	50	$11,250	$44.47
5	FY2025	$275	253	40	$11,000	$43.48

That's 50% gain within 5 years. Not me saying :)

Top Stories

Consumers cautious according to Harvey Norman, as profit slumps 35% in FY24

The Calmer Co’s Anthony Noble reflects on record breaking FY24

Consumer Staples Shine Amid Retail Slump – Key Stocks to Watch

WA Nifty copper project steps closer to restart with Cyprium Metals inking $40M loan from Glencore

Vysarn acquires Waste Water Services Pty Ltd for $7.5M; WWS to become subsidiary as expansion continues

Tamboran kicks off Shenandoah South pilot project with SS-2H well spud

PYC achieves key designation for drug aiming to treat blinding eye disease ADOA

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