|2011||2010||2006||4 Years||5 Years|
|Market Price $||56.3||43.34||24.8||17.82%||14.98%|
Projections of Nestle using the following assumptions:
- EPS GR of 8% per year, that is, its earnings double in 9 years from 2011.
- At the end of the 9 year period in 2020, its intrinsic value was at PE of 22x.
|Projections||EPS GR 8%||Projections|
|PE 22||15.3.12||CAGR||Using Historical Price|
|Market Price $||85.6152||56.3||4.77%||56.3|
Using the above 2 CONSERVATIVE assumptions, you can expect a total return per year of about 9.6% if you were to invest into Nestle today. This return is derived thus: about 4.77% from capital appreciation and about 4.8% from dividends.
The more enterprising investor may wish to look for investments with a higher return of 15% or more. Nevertheless, a return of 9.6% is good for many.
Please note that the projections are over a long period of 9 years. Over the short term, the price of Nestle can be volatile too and your return may even be negative depending on the price you paid to own it.
Graham defined investment thus: An INVESTMENT OPERATION is one which, upon THOROUGH ANALYSIS, promises SAFETY OF PRINCIPAL and a SATISFACTORY RETURN. Operations NOT meeting these requirements are speculative.