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

To: Paul Senior who wrote (58233)	10/20/2016 12:39:23 PM
From: George8	Read Replies (1) \| Respond to of 78751

Technically SYNT looks really bad. What are the causes for the huge loss or write off? Can the bleeding be stopped for good? What are the dividend outlooks? I am looking to purchase a few shares.

To: Paul Senior who wrote (58233)	10/20/2016 7:01:26 PM
From: staring	1 Recommendation Recommended By E_K_S Read Replies (2) \| Respond to of 78751

Here's the approach I usually use: Normalized EPS (based on average ROE) = average ROE over the sample period * BVPS (latest) P/E ratio based on the normalized EPS = Current stock price / Normalized EPS (based on average ROE) cfaglossary.blogspot.pt The problem with this approach is that companies with high ROE barely need equity to operate. Therefore, the book value of equity in a given year affects the year's measure with no relation with operational performance. Therefore, I use an approach based on Net Income Margin: Normalized EPS (based on average NIM) = average NIM over the sample period * Sales (latest) P/E ratio based on the normalized EPS = Current stock price / Normalized EPS (based on average NIM) One limitation of this approach is that does not account for potential unsustainable levels of Sales (Sales normalization would be recommendable, for instance through a regression). Nonetheless, I does not seem SYNT is having sales levels particularly abnormal compared with recent years, so I passed that adjustment. 2006-12 2007-12 2008-12 2009-12 2010-12 2011-12 2012-12 2013-12 2014-12 2015-12 TTM Revenue 270 338 410 419 532 642 724 825 911 969 996 Net Inco 51 63 87 118 114 123 186 220 250 253 264 Margin 18.89% 18.64% 21.22% 28.16% 21.43% 19.16% 25.69% 26.67% 27.44% 26.11% 26.51% The Normalized EPS for SYNT = 23.6% * 996 / 84 = 2.8 Normalized PE = 22.63 / 2.8 = 8.08 Even in a scenario that the company does not grow this multiple is very attractive. If it maintains a fraction of its growth in the last decade, then the company is a great value opportunity.