I do agree that the benchmark to value a business is in the revenue generation.
If you are using the measurement of a business in turning earnings to net cash (Disregarding profit margins, revenue growth, etc), wouldn't it be better to use Cash from Op instead? Free Cash Flow (As a bank balance) is influenced by investing and financing activities, and high growth companies use a fair amount of cash to expand so how much they leave in the bank will be skewed.

The number of years used in the formula influences the final value so was wondering of the significance of the 5 years. So if I use a smaller number like 4, I end up with a smaller value (2.91). If I expand it to 6, it increases the value.



Anyhow, let's jump into the projected growth of the company at 10%.
I think the industry is expected to grow at 6-7%, not sure if I remembered it wrongly as I read it somewhere and is purely from memory. If that is true, then would it be better to use industry growth rate as a projection?


Sorry for the deluge of questions!

On another note, Magni looks to continue being flat-ish at least until the next QR. Doesn't have a calatyst in the short term.

Waiting for SPMX QR. Guessing it may be record profits, and the market responds by being red again.


For long term positions, I'm more of a guesstimate.
Usually starts off with the basic fundamentals, revenue and balance sheet. Then management and what the company direction is, this one is a little tricky as I'll need to go back and read like the past 10 years AR and see if they have grown the business the way they set out to. This one is really subjective. Then comes the news search to see if any articles come up, and how that ties into the entire 10 year journey. After that, it is checking up on peers if they are competing for the same customers or is largely separated and if they are a better prospect. Industry analysis follow that to see how it generates money, where it is headed and prospects (airlines die here for me). If at this point I'm still game for it, then comes price entry analysis.

This is where I take the 52 week history, plot in the QR release dates and see how it responds to news. Some can be really sensitive to news, others can announce a good quarter and the price doesn't change. Big price swings in between QR, I'll try search for news on that date to map out the story. At the end, I'll probably derive a price range that's acceptable to me with a CL level.


Short term punts are generally less work. I'd call these calculated gambles.


This post has been edited by statikinetic: Jan 27 2021, 01:25 AM

WOW!! first of alll... great stuff.

ya.. I do note that the number of years do play a significant part. Discount it too far into the future and the figures do really get dizzy.

even the discount rate ....

smurfs

saw it yesterday evening....

I'm not so sure / convince why the stock fly like this ...even with current market sentiment..

too fast too furious...

Bonus Issue got so powerful meh

Yalo... recent few bonus issue so power

WOW! Great stuff!

Try ... change the rate to 5% instead of 10% for the free cash flow....

what would you get?

Another day of just sitting in the market.
Numbers are pointing that I'm way better at picking funds than picking stocks. Might have to portfolio adjust next quarter.

Looking at the whole GME drama for entertainment.

Sorry for the late reply. Just done busying.

I think the reason why free cash flow is used instead of operational cash flow is because it would be futile to know only how much money the company can generate if it utilizes most if not more of its operational cash flow to finance debt, paying dividends or investing and end up with illiquidity.

As you may know, some companies go bankrupt not because it’s not profitable, but because they don’t have enough cash liquidity.

Plastic demand projected to increase approx. 5% annually, but TGuan’s growth in percentage is double digit annually. So it would be fairer imo, to use company’s projected growth rate..

Thanks Boon, I’m still learning haha..

Anyway, I derived the free cash flow growth rate based on its track record..not plucking any numbers from the sky to fit the equation haha..

https://www.google.com.my/amp/s/www.cnbc.co...on-reports.html

I read somewhere in the news yesterday that if Japan decided not to host the Olympics, UK (if I remember correctly) would take over..

Oh I do understand where that 10% came from. I feel 5% would give one an alternative value .... one which is not as optimistic as a 10% over 5 years.

Hey, hope you are doing OK and the Covid cases aren't weighing you down too much. Your workload must be on a consistent high!

Internally, I read up that Japan is still trying to unwind the financial Web of sponsorships and investments that have already gone in. Sheer financial power might just see the Olympics through. Not sure about UK, they seem even worse off than Japan in terms of the pandemic.

Shaking legs at the lack of action in the market today.

Sitting is a very important phase, in regardless one is a trader or an investor.

I am in a sitting period too. I once sat more than a year before, not trading.

So don't get too worked out over sitting.

Yup.. you’re right..

Tbh these calculations are rather personal to me, anyone else doing it would derive a different number. For this reason, initially I wanted to pm statikinetic instead of posting it publicly but at the end gave in due to technical reason

At the end of the day, the intrinsic value one get may well be used as a tool for self-comforting purpose only.. because if the market doesn’t agree with you..man it’s an endless waiting game..

Borrowing a quote from John Maynard Keynes: “the market can remain irrational longer than you stay solvent.”

I hope my memory does not fail me. Some 1 taught me this b4.

Use the 10 year CAGR and then compare it versus the 5 year CAGR (which you used). Now if the 5 year CAGR is lower than the 10 year CAGR, then there is a possibility that the company growth is slowing .....

But then this is something I am not entirely keen on myself. lol.
Cause, generally, our companies really do not have the strong competitive moat... so seeing the 10 year stuff is really ancient.

Anyway, ya... the discount rate and the growth rate ... the 2 most important assumptions here.... and not forgetting time.

"The money is in the sitting".
Quote I heard from somewhere before. Peeping at the announcements at the end of the day for SPMX QR.

Am really happy you posted it here.
Very true about market irrationality. And the degree of it has been staggerring these days.

General question : How much of you total portfolio do you invest directly in stocks? Taking into account fund, commodities and cash.

Doing nothing when there is nothing to do - and this one is about the hardest thing to do... more so when one just came out from a very huge win. Hands all gatal... itching and itching and itching to buy again...

Position sizing and expectancy .... something great to read...