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Strategies & Market Trends : Value Investing
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To: Jurgis Bekepuris who wrote (28479)10/12/2007 12:24:48 AM
From: Spekulatius  Read Replies (2) of 78753
 
Jurgis, re EXPN.L EXPGY how did you come up with ther 20% ROE number?

Experian does not follow US GAAP as far as i can tell,since the subtract goodwill depreciation and amortization expenses from earnings. US GAAP does not allow this any more unless goodwill is impaired. if you add above expenses back, they do roughly 30p or 60c/share, which is a ROE of 30%. I do not do valuation based on ROE anyways. For me the value proposition is as follow:

Organic growth rate:
High single digits (assume 7%)
Dividend yield 3%
Growth rate via acquisitions (funded from FCF): 3%
=Total return expectation of 13%/ year.

This is far better than market average. The above numbers are achievable, in the past Experian has shown higher growth rates. The fact that they are a spinoff is positive (IMO) as most spinoffs tend to energize management.
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