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Amazon through the growth prism
Markets often distinguish growth from value, but for an equity, growth defines value. For most stocks, this can be seen by the close relationship between the organic revenue growth being delivered by a company and the implied growth rating being discounted by the share’s operating FCF yield. A problem however arises when trying to price […]
Continue readingGoogle – markets chasing stories arrive late to the party
Markets love a good story. They’re so much easier to digest than actual analysis and usually provide a catalyst for action that brokers and journalists need to stimulate a transaction. Take for example Google’s Q2 results last Thursday. The results themselves were solid, but were neither significantly ahead of street estimates nor provided anything particularly […]
Continue readingShrink EPS while showing rapid YoY growth
As with every reporting season one can play the game of “spot dodgyâ€. Unfortunately, the deluge of quarterly results with their more limited disclosure can make it tough to identify some of the more sophisticated scams. As always these can include the myriad of acquisition accounting tricks (fair value adjustments, acquisition timings, accounting policy adjustments, […]
Continue readingKrafting an exit after struggling to restore growth
After a less than sparkling recovery in Q4 FY14 organic revenue growth to under +3.5% YoY, the Kraft management seems to have thrown in the towel to the current financial masters at Heinz (Berkshire Hathaway and 3G Capital) and agreed to its ‘merger’ offer. While conceding most of the plum jobs in the new combine […]
Continue readingEnterprise Inns: Asset play or just value trap?
Enterprise Inns (ETI): With a share price at an almost 60% discount to NAV, this may appear to be a compelling asset play, albeit this argument might have also appeared valid when the discount was 30%,40% or 50%. As with banks in 2008, a balance sheet asset is only as good as the credibility it […]
Continue readingRecency bias – the curse of financial markets!
We are all guilty of it, but it is probably the single most dangerous investment sin. Perhaps it is part of our social evolution to conform. A sort of “Eat shit 17 quadrillion flies can’t be wrongâ€. With regards to financial markets you may have seen the same shit, but given a pseudo- intellectual […]
Continue readingBudget airlines soar in September, but war of the handbags still being fought
Ryanair is still packing in the passengers (Sept +5% with load +5ppts to 90% vs +7.5%/+2.5ppts respectively for EasyJet), although with the Air France strike settled and the end of the summer holiday season I would expect the Oct traffic figures to be a little less supportive. The stock is still my preferred one in […]
Continue readingIPO: Market valuing Alibaba as if it were a normal US tech Co!
I am surprised! Having cleaned up the reported numbers a little (eg including stock comp and intangible amortisation – excl goodwill), and applied a broadly average growth discount trend, the Alibaba NPV on the WYT growth discount model comes within 5% of the post IPO price – nb this already adjusts for forward valuation horizon […]
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