EPV (Bruce Greenwald) & Deserved P/E Demystified : PDD Case Study
Subject: EPV (Bruce Greenwald) & Deserved P/E Demystified : PDD Case Study
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EPV (Bruce Greenwald)
= EPS × 1÷CICC Ratio
= EPS × Deserved P/E
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Deserved P/E
= 1÷CICC Ratio
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CICC Factor
= Clean Invested Capital Cost Factor
= 30Y Government Bond Yield Factor × ( 1 + D/E × (1 + 2 × 30Y Government Bond Yield Ratio) ) ÷ (1 + D/E)
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CICC Ratio
= CICC Factor - 1
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Significance:
Deserved P/E of (1÷CICC Ratio) is assessed in the Risk Management standpoints (the magnitude of Inflation and D/E), as a fair valuation standard across all industries, the higher CICC, the lower Deserved P/E.
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EPS is assessed in the Company Strength Management standpoints (the magnitude of Revenue and NPM), as a fair valuation standard across all industries, the higher Revenue and NPM, the higher the EPS.
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Case Study:
PDD
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Non-Gaap EPS
= (99,364,469+7,936,971)÷6.9931÷(5,929,576÷4)
= USD 10.3507581966
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D/E
= (2,498,643+2,880,152)÷414,907,086
= 0.0129638543
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CICC Factor
= Clean Invested Capital Cost Factor
= 30Y Government Bond Yield Factor × ( 1 + D/E × (1 + 2 x 30Y Government Bond Yield Ratio × 2) )÷ (1 + D/E)
= 1.04982×(1+0.0129638543×(1+2×0.04982))÷(1+0.0129638543)
= 1.0511587169
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CICC Ratio
= CICC Factor - 1
= 0.0511587169
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Deserved P/E
= 1 ÷ CICC Ratio
= 1 ÷ 0.0511587169
= 19.5470109611
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EPV (Bruce Greenwald)
= Non-Gaap EPS × Deserved P/E
= 10.3507581966 × 19.5470109611
= USD 202.3263839246