RYM - Ryman Healthcare

[Bjauck]

I am not saying my numbers are exactly right but I think your 80% growth figure is too high to call it year-on-year.

In my view it pays to 'experiment' with SP growth rates and datum points as it provides a sensitivity analysis when weighing up the validity of the numbers that fall out.

Good points.
I took a quick look at past prices...

end March 2007 SP 2.10
end March 2010 SP 2.07
end March 2011 SP 2.37 + 14%
end March 2012 SP 3.08 + 30%
end march 2013 SP 5.04 + 63%
now March 2014 SP 8.65 + 71%

Using Vaygor's 2007 sp figure and Using the long term profit increase at 20% pa as the comparison basis, it seems as though the Share price underperformed from 2007 to 2011 (the credit crunch era). The gains in 2012 to the present have been by way of catch up to (perhaps) where the price should have been to reflect the increase on profits. From these figures it would appear that the percentage gains seen recently will be unlikely to repeat, unless the sustainable increase in profits is more than 20%. On the other hand, the big percentage gains recently may not reverse as they may have been the final catch up to make up for the(unjustified?) drops in the credit crunch era. (Of course I am not looking at SP behaviour because of future crises, "market irrationality", fear or euphoria.) This is back-of-the-envelope work, DYOR.

[Snow Leopard]

CaptureRYM.PNG
YoY for specified time period
(SP accuracy not guaranteed)

Best Wishes
Paper Tiger

[Snoopy]

I'd add a close friend of mine, XRO, to that example as well. Oh the uproar when XRO hit $5, it was a "bubble", it was way "overvalued", the bubble was about to burst, even the tiniest prick would send the SP crashing, people were fools to invest in such a company +800% later.....

I am one of those people who would have said Xero was in bubble territory at $5. But guess what? Even with the benefit of hindsight, I would not change my view that Xero was in a bubble at $5.

Bubbles are always obvious with hindsight. As an investor though, I have to work in the present. That means not just looking at the share price, for that one measure alone is not sufficient to assess value. Xero has no earnings. It has great potential for future earnings. But the current share price seems to have already assumed the capitulation of the likes of Intuit. Without knowing if Xero will ever generate a profit, the incremental assumption that all competitors globally will capitulate seems to me to be a stretch too far for any positive cashflow type investor such as myself. If the Xero share price collapsed to $5 tomorrow I personally still wouldn't buy it.

RYM is in quite a different position with a solid track record of earnings and business plan execution and real and growing profits already on the table. If the RYM share price collapsed to $5 tomorrow I would buy, almost regardless of whatever piece of news caused such a share price collapse. The track record of RYM just cannot be ignored. That doesn't mean that you can't pay too much for RYM though. If anything, RYM might be in a value bubble today. Even a really excellent company can still become too expensive, relative to other investment opportunities out there. But RYM is not in a bubble in the sense that Xero is. At today's prices, I wouldn't buy either though.

SNOOPY

[blocker3]

I am one of those people who would have said Xero was in bubble territory at $5. But guess what? Even with the benefit of hindsight, I would not change my view that Xero was in a bubble at $5.

Bubbles are always obvious with hindsight. As an investor though, I have to work in the present. That means not just looking at the share price, for that one measure alone is not sufficient to assess value. Xero has no earnings. It has great potential for future earnings. But the current share price seems to have already assumed the capitulation of the likes of Intuit. Without knowing if Xero will ever generate a profit, the incremental assumption that all competitors globally will capitulate seems to me to be a stretch too far for any positive cashflow type investor such as myself. If the Xero share price collapsed to $5 tomorrow I personally still wouldn't buy it.

RYM is in quite a different position with a solid track record of earnings and business plan execution and real and growing profits already on the table. If the RYM share price collapsed to $5 tomorrow I would buy, almost regardless of whatever piece of news caused such a share price collapse. The track record of RYM just cannot be ignored. That doesn't mean that you can't pay too much for RYM though. If anything, RYM might be in a value bubble today. Even a really excellent company can still become too expensive, relative to other investment opportunities out there. But RYM is not in a bubble in the sense that Xero is. At today's prices, I wouldn't buy either though.

SNOOPY

I totally agree with your summary ,that I placed in bold. Cheers

[Jim]

yup - me too

Maybe due for a share split

[Bjauck]

Maybe due for a share split

How would a share split affect whether the current share price is fair value?

[macduffy]

How would a share split affect whether the current share price is fair value?

It wouldn't!

In practice though, it might attract a bit more interest from those who would perceive it as better value - or at least, more affordable!

[couta1]

It wouldn't!

In practice though, it might attract a bit more interest from those who would perceive it as better value - or at least, more affordable!

Correct Share split has no relationship with fair value valuation,you would possibly see a further increase in share price prior to split and a spike in share price after split as people think they are getting better value which of course is only an illusion

[Harvey Specter]

How would a share split affect whether the current share price is fair value?

Simple - a 4:1 split would make simple people think the share is cheap at $2.

[winner69]

Simple - a 4:1 split would make simple people think the share is cheap at $2.

And be cheaper than SUM

Good for RYM but punters might think SUM expensive and sell out