ATC Numbers : To substitute both Graham Number & Net-Net — PDD Case Study
Subject : ATC Numbers : To substitute both Graham Number & Net-Net — PDD Case Study
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(A)
(I)
ATC ROA_EPS_GPA_NCAVPS Number
= ROA × √(EPS × GPA Ratio × NCAVPS)
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(II)
ATC ROA_EPS_NetROIC_NCAVPS Number
= ROA × √(EPS × NetROIC Ratio × NCAVPS)
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(III)
ATC ROA_EPS_ROA_NCAVPS Number
= ROA × √(EPS × ROA Ratio × NCAVPS)
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(B)
PDD Case Study
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FY2025
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GAAP
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Gaap EPS (Diluted)
= USD 9.5851238525
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GPA (the same for GAAP and Non-GAAP)
= 100 × Gross Profit/Total Assets
= 100×(431,845,713-188,801,753)÷630,044,327
= 38.5756921513
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GAAP ROA
= 15.771028282
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GAAP NetROIC
= 23.6421144492
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NCAVPS (Diluted)
= USD 29.3099683501
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(I)
ATC ROA_EPS_GPA_NCAVPS Number (GAAP)
= ROA × √(EPS × GPA Ratio × NCAVPS)
= 15.771028282 × √(9.5851238525 × 0.385756921513 × 29.3099683501)
= USD 164.18119537
Correspond to P/E 17.1287505406 (GAAP)
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(II)
ATC ROA_EPS_NetROIC_NCAVPS Number (GAAP)
= ROA × √(EPS × NetROIC Ratio × NCAVPS)
= 15.771028282 × √(9.5851238525 × 0.236421144492 × 29.3099683501)
= USD 128.5315389244
Correspond to P/E 13.409481286 (GAAP)
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(III)
ATC ROA_EPS_ROA_NCAVPS Number (GAAP)
= ROA × √(EPS × ROA Ratio × NCAVPS)
= 15.771028282 × √(9.5851238525 × 0.15771028282 × 29.3099683501)
= USD 104.9775795326
Correspond to P/E 10.9521359503 (GAAP)
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The GAAP enforcement in treating SBC (RSU) as an expense has made GPA becoming a viable valuation Mathematical Variable in the Formula of ATC ROA_EPS_GPA_NCAVPS Number (GAAP).
The GPA balances out the GAAP’s Cashless SBC(RSU) Expense Punishment.
ATC ROA_EPS_GPA_NCAVPS Number (GAAP) could be a rational potential candidate of Intrinsic Value (GAAP) under GAAP rules.
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Howard Marks has entered PDD at the reported price USD 102.22 which is well below the USD 104.9775795326 of ATC ROA_EPS_ROA_NCAVPS Number (GAAP).
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Remarks :
The indispensable and invaluable Productive Assets rest not on the Total Equity (Net Assets) but the Net Current Assets.
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PPE is the Machine.
Net Current Assets are the daily continuous Inputs.
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Without Inputs, the Machine produces nothing.
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Lastly, PPE optimum operating condition is periodically maintained and upgraded by NCA.
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Without NCA to support PPE, PPE will die.
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High ROIC and ROA
+
High NCAVPS
= Strong Root and Rich Soil for Growth
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High NCAVPS implies High CROIC.
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Only High CROIC could produce High NCAVPS.
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High CROIC implies High ROIC, High Earnings Quality & Richful Free Cash Flow for next year’s growth and maintenance expansion.
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The High CROIC and ROIC provide Thrust for Revenue and Profit Growths.