Summary: New Insight on Valuation Methodologies
Summary: New Insight on Valuation Methodologies
.
Terminologies :
.
Forward Composite Profitability
= FCP
(Assuming the same magnitudes of Net Profit Growth, Invested Capital Growth and Total Assets Growth persist in the following year)
= √{ ROIC TTM × ROA TTM × Gnet_profit Factor TTM² ÷ ( Ginvested_capital Factor TTM × Gtotal_asset Factor TTM ) }
Or
= 100 × [ √{ ROIC Factor TTM × ROA Factor TTM × Gnet_profit Factor TTM² ÷ ( Ginvested_capital Factor TTM × Gtotal_asset Factor TTM ) } - 1 ]
.
Gxxx Factor
= 1 + Gxxx Ratio
.
Clean Invested Capital Cost (CICC) Factor
= { [ 1 + 10 Years Government Bond Ratio ] × [ 1 + D/E × (1 + Commercial Loan Prime Ratio + Spread Ratio) ] ÷ [ 1 + D/E ] }
.
CICC Ratio
= CICC Factor - 1
.
Terminal Factor
= (1 + Market Risk Premium Ratio + 10Y Government Bond Ratio) ÷ Clean Invested Capital Cost Factor
.
Residue
= Net Profit - Dividend
.
Non_Factorized_DPS
= Real DPS
.
Factorized_DPS
= Real DPS × (2 - Real Dividend Payout Ratio)
.
Non_Factorized_Shadow_DPS
= Shadow DPS
= 1/(1+D/E) × CICC/ROIC × EPS
= 1/(1+D/E) × CICC × (Invests Capital Per Share/EPS) × EPS
= 1/(1+D/E) × CICC × Invested Capital Per Share
.
Factorized_Shadow_DPS
= Shadow DPS × (2 - Shadow Dividend Payout Ratio)
.
(1).
ProfitablityGrowth Metric Value
= ProfitabilityGrowth × Metric
.
ProfitabilityGrowth
= Gnet_profit
= Ginvested_capital
= ROIC
= ROA
= √(ROIC × ROA)
=
Clean Economic Profitability (CEP): ∛(Gnet_profit × Ginvested_capital × ROIC)
= FCP: √{ ROIC TTM × ROA TTM × Gnet_profit Factor TTM² ÷ ( Ginvested_capital Factor TTM × Gtotal_asset Factor TTM ) }
Or
=
CEP: 100 × [ ∛(Gnet_profit Factor × Ginvested_capital Factor × ROIC Factor) - 1 ],
Or
=
FCP: 100 × [ √{ ROIC Factor TTM × ROA Factor TTM × Gnet_profit Factor TTM² ÷ ( Ginvested_capital Factor TTM × Gtotal_asset Factor TTM ) } - 1 ]
.
Metric
= EPS, Residue, Real DPS, Factorized Real DPS, Shadow DPS or Factorized Shadow DPS
.
Bargain emerged when “Market P/E < ProfitablityGrowth” emerges.
.
(2)
Perpetual Discounted Metric Without Growth Model
(Metric = EPS, Residue, Real DPS, Factorized Real DPS, Shadow DPS or Factorized Shadow DPS, CICC, Period = Perpertual Runway = 99999 Years, Growth Factor is Excluded in Perpetual Perspective)
= Metric ÷ CICC Factor × [ 1 - (1÷CICC Factor)⁹⁹⁹⁹⁹ ] ÷ [ 1 - 1÷CICC Factor ]
Or
= Metric ÷ CICC Ratio
.
(3)
Discounted Metric Period Year Without Growth Model
(Metric = EPS, Residue, Real DPS, Factorized Real DPS, Shadow DPS or Factorized Shadow DPS, CICC, Period = 10Y, ROIC, √(ROIC×ROA), ROA or Forward √(ROIC×ROA); Growth Factor is Excluded)
= Metric ÷ CICC Factor × [ 1 - (1÷CICC Factor)^period ] ÷ [ 1 - 1÷CICC Factor ]
.
(4)
Discounted Metric 10Y with Growth Model
(CICC, Period=10Y, Metric = EPS, Residue, Real DPS, Factorized Real DPS, Shadow DPS or Factorized Shadow DPS, Residue, Real DPS or Shadow DPS; Growth Factor = 1 + Net Profit Growth Ratio)
= Metric × Growth Factor ÷ CICC Factor × [ 1 - (Growth Factor÷CICC Factor)¹⁰ ] ÷ [ 1 - Growth Factor ÷CICC Factor ]
.
(5)
ATC ROA_Metric_XXX_NCAVPS Number
= ROA × √(Metric × XXX Ratio × NCAVPS)
.
XXX = GPA, ROIC, √(ROIC×ROA), ROA or FCP
.
XXX Ratio = XXX ÷ 100
.
Metric = EPS, Residue, Real DPS, Factorized Real DPS, Shadow DPS or Factorized Shadow DPS, Residue, Real DPS or Shadow DPS
.
(6)
Discounted Terminal_Metric_10Y Model
= Metric × Terminal Factor × (1 - Terminal Factor¹⁰) ÷ (1 - Terminal Factor)
Metric = EPS, Residue, Real DPS, Factorized Real DPS, Shadow DPS or Factorized Shadow DPS, Residue, Real DPS or Shadow DPS
.
Reference :
The Logic Way
of Computing a Clean Invested Capital Cost Factor & Clean Discount Factor
.
Finally,
RELATIVE VALUATION by :
Daily Market P/E to Selected Compounder Index Weight Ratio
= Daily Market P/E ÷ Selected Compounder Index
= 1, Intrinsic
> 1, Overvalued
< 1, Undervalued
.
(H)
Which Compounder Index do Superinvestors favor?
.
Warren Buffett, Charlie Munger, Joel Greenblatt and LiLu favor the ROIC as the Compounder Index that lives in the inner core of a business.
.
Peter Lynch favors the Net Profit Growth (Gnp) as the Compounder Index that lives in the inner core of a business.
.
Henry Singleton favors the ROA as the Compounder Index that lives in the inner core of a business.