How do you value company DEF?

Company DEF

This company is in a business sector with durable competitive advantage and economic moat.  Its management has delivered many years of consistently good performance.  Its long term shareholders have been richly rewarded.


Financial data

ttm-Earnings $ 367 million
DPO 48%
Dividends paid $ 177 million
Market cap $ 5100 million


PBT Margin 36%
PAT Margin 27.3%
ROE  22.1%

ttm-PE 13.9x

EY  7.2%
DY 3.47%

Risk free interest rate 4%


How much would you pay to own this company?

Based on earnings stream:   Asset value = $ 9175 million
Based on dividends stream:  Asset value = $ 4425 million

At present market capitalization of $ 5100 million, the reward: risk ratio is as follows:

Upside = $ 4075 million
Downside = $ 675 million

Upside reward :  Downside risk = 6 : 1


Now, this company has been growing its earnings at 15% per year for the last 10 years.  It has also paid growing dividends over these years.  It is also predicted to a high degree of confidence that this company can continue to deliver such growth.

For those with a long term horizon in their investing, is this company under-valued, fairly valued or over-valued?

Present Value is the discounted value of all its future cash flows, and remember that growth is a factor in the calculation of Present Value.

Remember also the three important words in investing - Margin of Safety.

Do you have a margin of safety in your investing into this company at today's price?