dspp wrote:Melanie wrote:cshfool wrote:I get a rough value of 247p-350p for the EPV (using IFRS3 £342m-£443m norm 2017 profits - Oakley) and 8% interest rate, so some strong future growth seems baked in.
Can you go over what you've now calculated here?
Matt
Just a guess, but:
Take approx (say) £400m/yr profits (or whatever is the avge of the last few stable years), and work out the NPV of that for (say) 10 years into the future using (say) an 8% discount rate. Then divide that NPV by the number of shares to give a implied value per share. If actual shareprice is above that then the market is presumably expecting more profits to become available in the future, i.e. growth.
I haven't done the numbers, I'm just suggesting what might be the methodology. Or maybe cshfool has a different methodology in which case I'll get corrected (!). Anyway have a go ........
Thanks dspp,
Yes I've seen a couple of different valuation techniques. (e.g. multiple of PBT/number of shares, and also DCF based on the most recent FCFps value). I think whenever the techniques need you to guess rates and things they become questionable.
BTW me and Mel have done even more chatting and analysis on Sage! Yes, I know, you are probably thinking I am a tad obsessive. But one can't always escape one's nature so I'm happy with that. We are/were tempted towards SGE, mainly for the reason that you observe: that they have precious little established competition in the UK (i.e. Intuit and Salesforce, are not quite so UK biased ), but after now having put 2012-2017s records through, the underlying trend seems to be more or less consistent margins, but gradually shrinking ROCE, for which the reason can readily seen: increasing asset base. And also a fall in the ability to turn profit to cash (I couldn't readily explain that).
dspp wrote:To an extent the point I am making is that there are real companies behind the financial accounts, and that (in my opinion) one needs to have sufficient understanding of that underlying reality to consciously decide whether to dig any deeper. Or you are at risk of just being a slightly cleverer monkey sticking pins in the list. Of course we are never in perfect possession of all of the facts, even if we are on the inside, so the real decision is when to stop analysing and decide on buy/sell.
I hear what you are saying. I think that I'm slightly more inclined to focus more on the numbers actually, since I'm usually cynical of how companies like to present themselves (advertisements/presentations etc). I'm not saying that we don't read past the numbers on an AR. We recently appraised (and subsequently bought) Bodycote (BOY) and we found their product applications interesting and diverse probably with long-lived markets.
But I think we'll leave Sage for now, or at least until the next AR comes out.
Finally: if anyone else is crazy enough to spend hot sunny evenings punching numbers into spreadsheets, a word of warning re. Sage: from 2014 they started cooking the P&L part of their ARs, in a way that they didn't in 2012-2013. They split it into 3 columns 1) "Underlying" 2) "Statutory" and 3) a column with the adjustment values for mapping between the first 2 columns. Unfortunately I originally picked figures from the underlying section, but then I got awfully confused when I started to look at the Cash flow statement. In the end I read the notes accompanying the Cash flow calcs. and figured out that the statutory figures were the ones being used, and thus my sheets results (which were obviously skewed in one direction previously) would be more consistent if taken from this section too.
Matt