Originally Posted by
Beagle
Well said Balance. My post yesterday was simply to correct the (hopefully inadvertent) mistake that the forward PE was only 22 and this was cheap for a growth company with ATM's growth prospects. The real forward PE based on average analyst forecasts, (not my forecast or anyone else's on here that might be subject to bias) for FY20 of 45 cps at $13.50 is exactly 30.
I followed this up with observing that the forward PE under Geoffrey Babbage's leadership was ostensibly the same when the company was growing eps dramatically faster than it currently is. Simple logic suggests a lower PE is appropriate if eps growth has dramatically slowed. One example that readily springs to mind is SUM which used to trade on a forward PE of 30 when it was growing much faster and was a less mature company and it now trades on a PE of about 13.
Jayne herself has admitted that essentially all the low hanging fruit has been picked, (as Balance quite correctly points out), has actively guided to lower growth going forward.
Others then went on to critique the whole PE thing as though earnings don't matter. Well, I suppose when faced with an argument that can't be rebutted, (growth is slowing) those who have a strong vested interest have no choice but to try and undermine the valuation methodology.
According to market screener which compiles professional analyst views from ten analysts the average growth rate in eps for the next 3 years is 18%. That is very much lower than what's been enjoyed in the last three years, (in the last 2 years eps has more than tripled). The growth rate has dramatically slowed, something that should be perfectly obvious to anyone prepared to open their eyes.