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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: J Mako who wrote (45498)11/16/2011 3:38:56 AM
From: J Mako  Read Replies (1) | Respond to of 78702
 
> I have reservation on the assumption that Growth = Retention Rate x EPS x ROE.

Forgot to elaborate: My problem with this is, it gives the appearance the RHS are inputs and the LHS is the output, and the mgmt can just dial up or down the inputs to get the output. In the end of the day, everything is driven by the characteristics of the competition.



To: J Mako who wrote (45498)11/16/2011 5:17:28 PM
From: Dennis 3  Respond to of 78702
 
Typically a business selling at a low p/b has low margins and its share price reflect a low multiple. An 8 ROE is below the avg and it indicates its in a price competitive business. An 18 ROE is above avg and it indicates the business is being run correctly and/or has protective moat. Remember to also look at ROTC along with ROE. High ROE could be gained by taking out a lot of bank debt.


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