By the way I've also read/heard of the PYAD concept, and whilst I'm a bit dubious about whether we will be able to find brilliant firms at knock down prices, I do think that the concept is pretty sound, and I'd like to try to really think more about valuing a share before pressing the buy button.
So we had a look at a few shares, those being Lloyds (LLOY), Royal Dutch Shell (RDSB) and Kingfisher (KGF).
This is a quick copy and paste of some figures taken just now from the Morningstar:
RDSB
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Price/Earnings 14.6
Price/Book 1.4
Price/Sales 0.8
Price/Cash Flow 8.5
Dividend Yield % 5.3
LLOY
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Price/Earnings 11.9
Price/Book 0.9
Price/Sales 1.4
Price/Cash Flow 7.9
Dividend Yield % 5.1
KGF
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Price/Earnings 13.9
Price/Book 0.8
Price/Sales 0.5
Price/Cash Flow 17.2
Dividend Yield % 4.2
So as we can see, they are chosen from quite different sectors: Energy, Banking, Consumer DIY.
What does Price/Cash flow mean? Is it really just like a super charged version of P/E? That is, earnings with tax+interest+depreciation-capex as the denominator instead of just earnings.
So in summary is this comparison, with all else being equal, just saying "if you buy KGF you are just paying about 2x as much for the same free cash flow as for LLOY and RDSB?
M&M