Nice pair of Rose Tinted Spectacles
Quote:
Originally Posted by
Roger
Plenty of people buying Summerset on a historic PE of over 40 believing that the company will continue to grow quickly, on the other hand as you can see from the link I provided late last week, Ryman have plans to grow their operation in Australia quickly and have recently taken on board a highly talented new Australian director. When you consider that Ryman has grown the company significantly both before and throughout all the years of the GFC they command the respect to deserve a premium rating based on proven performance and a thoroughly proven growth stratagy.
Anyone looking for a material correction in the share price shouldn't hold their breath, in my opinion. This stock is best of breed by a substaintial margin compared to its other unproven competitors, yet one of which trades on nearly twice the multiple, go figure ?
I respectfully disagree with you Sparky, this company is growing its cash flow at a remarkable rate circa 30% for the last two years and its this cash flow that will drive the profit and build rate going forward.
Fact is cash returns almost nothing so if you're not investing in a blue chip proven growth stock like this, where do you put your money to get better proven results, surely not Summerset with its incredible PE ratio and unproven record ??? or are you in the "I'm waiting for a significant pull-back camp" ?
If Ryman can grow their Australian operation and build momentum and brand credibility over there... the stock could easily be double its current price in 5-6years in fact if they can maintain 15% compound growth and the PE stays the same that's exactly where they'll be.
Operational Cash Flow is a lumpy thing and the 5 to 1 year average annual growth rates are:
12.0%, 18.1%, 14.1%, 29.2%, 31.3%
the last two years have benefited from the last step up in build rate to 700 pa. It is the great chicken and egg thing (or perhaps a virtuous circle) the cash flow funds the new building which produces a lot of the operational cash flow.
Now if we accept that at $6.38 Ryman is priced correctly given it future, then we can could quickly price Summerset on the assumption that it has achieved the same capability. Depending upon which particular metrics you want to use out pops a price range from $4.07 to $4.90.
Given that the market thinks it only worth $3.07 then despite the high historical PE you mention it is obviously not regarded as another Ryman yet.
But on the other paw if you believe SUM will get there in a few years then perhaps it's bargain, or maybe not.
Of course if the new improved Metlifecare every gets it act together then there's some serious share price appreciation, so wait and see how that if looks come Full Year.
But at the end of the day markets are irrational swinging between deep gloom and high exuberance and on the way between the two occasionally hits sensibility:
Over the last four years the Ryman share priced has averaged about 30% growth per year, over the last 3 months it has increased by 38%, where was the point of sensibility?
Best Wishes
Paper Tiger
I hope that all makes sense to someone