j,
Want your opinion (others welcome). I know you as a value investor that thinks more long term than short. You would not pay too much for a company and would expect a return that exceeds the market or putting your monies into an interest bearing account. So...
Presume you thinking of buying a company and wanting to figure out what it's worth?
The company has a BV of $8.25. Actual value is much higher because the fast depreciation schedule they use understates the value of Fixed Assets. Put the actual value of assets minus liabilities at $9.50 with $3.90 of this in cash.
Goodwill value. Earnings growth over last three years was 47.4%, 47.9%, and 48.7% . Last year, operations produced over $3.00. If you buy the company, you figure you can achieve an annual growth rate under your ownership at 1/2 historical (24%) over the next five years. This would add approximately $29.94 to actual value.
However, if you could keep the same management, growth could be much better, so you seek to keep them by giving them a deal wherein 40% of cash generated from operations will be paid out, 50% to them and 50% to yourself. They agree.
So, the company will be worth at least $31.00 in five years after you take $6.00 in profit sharing and the outlook for the next five years looks even more promising than the first five.
What is the value of the company? You want a good buy, so how much would you be willing to offer for the company?
I'm curious to see if you come up with the answer I have and how you get it. It's how I try to look at a stock when I buy.
TIA,
Ron
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