Hey Felix, Nice write-up. Just one comment - I think your earnings growth model formula is wrong. You should not have "-" for multiple contraction. You showed a 23% return:
= 20.88 %, with 40.73% Net Profit Margin, remarkable
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2.
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KLSE: Infoline TEC Group's ROA
= 18.79 % with 17.2 Net Profit Margin
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The Net Profit Margin will improve to 30% (FYE2025) from 17.2% (FYE2024), due to its MNC clients are willing to pay for Cybersecurity and managed services with very high gross profit margin.
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With the trend of revenue growth and spike of NPM, the forward ROA of Infotec is extrapolated > 32%.
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And the quoted price is very under valued, MOS 36%.
= Current Quarter Contract Liabilities ÷ Arithmetic Average Previous Four Quarters Contract Liabilities
.
Predicted Forward Net Profit Margin Improvement FACTOR
= Predicted Next Year NPM ÷ This Year NPM
.
Explanation:
The Reinvestment Rate is not included because the actual future reinvestment rate is unknown but the influential result of the reinvestment rate TTM had already reflected in the form of Net Profit TTM.
iv.
Both the Academic Expected Forward Net Profit Growth Rate Formula or the Extrapolated Forward Net Profit Growth formulas are meant to show the direction and vicinity of an outcome rather than the actual point of an outcome.
Hey Felix, Nice write-up. Just one comment - I think your earnings growth model formula is wrong. You should not have "-" for multiple contraction. You showed a 23% return:
Expected return = 20% + 0 - 0.1*((29-43)/43))= 23%
But it should have been 17% as shown below:
Expected return = 20% + 0 + 0.1*((29-43)/43))= 17%
I see, my bad. Thank you for the feedback and correction. You are absolutely right!
MoAT manifests in ROA.
.
1.
NYSE: Arista Networks's ROA
= 100×3.03÷14.51
= 20.88 %, with 40.73% Net Profit Margin, remarkable
.
2.
.
KLSE: Infoline TEC Group's ROA
= 18.79 % with 17.2 Net Profit Margin
.
The Net Profit Margin will improve to 30% (FYE2025) from 17.2% (FYE2024), due to its MNC clients are willing to pay for Cybersecurity and managed services with very high gross profit margin.
.
With the trend of revenue growth and spike of NPM, the forward ROA of Infotec is extrapolated > 32%.
.
And the quoted price is very under valued, MOS 36%.
.
Anyone invests in ASEAN stock?
Buffet, Munger said,over the long run, growth will merge with return of capital.
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Lesson learnt:
When reading the mental models of Warren and Munger, we must digest.
Use this formula:
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New Formula:
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Extrapolated Forward Net Profit Growth, Gefnp (Max)
= ROA × Extrapolated Forward Contract Liabilities Growth FACTOR × Predicted Forward Net Profit Margin Improvement FACTOR
.
where
.
Extrapolated Forward Contract Liabilities Growth FACTOR
= Current Quarter Contract Liabilities ÷ Arithmetic Average Previous Four Quarters Contract Liabilities
.
Predicted Forward Net Profit Margin Improvement FACTOR
= Predicted Next Year NPM ÷ This Year NPM
.
Explanation:
The Reinvestment Rate is not included because the actual future reinvestment rate is unknown but the influential result of the reinvestment rate TTM had already reflected in the form of Net Profit TTM.
iv.
Both the Academic Expected Forward Net Profit Growth Rate Formula or the Extrapolated Forward Net Profit Growth formulas are meant to show the direction and vicinity of an outcome rather than the actual point of an outcome.
For the Growth, Geometric Means method should be applied in this manner:
expected return
= 100 × (∛(1.A × 1.B × 1.c) - 1)
= 100×(∛(1.20×1.0×(1+0.1×29÷43))-1)
= 8.6030007909 %
Dear Archive Invest,
Do include in 15:
P/E ÷ ROA Multiple
Could you tell me why?