Oh My ! What Would Ben Graham value this company at ?
If you can wrap your head around high long term compound growth rates you will begin to understand why a company like Ryman and now SUM has / is going to create tremendous long term wealth for its shareholders.
First up this is a fantastic business model with little or no tax ever paid and shareholders getting all future capital gains tax free !
The traditional Ben Graham formula V = historic EPS x (8.5 + 2g)
This formula has now been updated by many who realise that Ben Grahame was using a historical risk free rate of 4.4%, (current 10 year rate for Govt stock is ~ 2.3%
It now looks like this V = [U]eps x (8.5 + 2g) x 4.4 /2.3
Annualising the current result we get underlying EPS historic of 22.44 cps.
Now the big question what's a reasonable future growth rate for the next 7-10 years ?
Considerations - We know their compound average growth rate for the least 5 years has been 44%
We know they have an assured land bank supply for the next 7 years on hand currently.
Lets be conservative here and assume future growth is half the average growth rate for the last 5 years , say 22%, seems very reasonable to me.
Input that into the formula and we get V = 22.44 x (8.5 +44) x 4.4/2.3 = $22.54
Of course brokers will have the growth tailing off dramatically after 5 years in their DCF models with probably only 2% terminal growth rate after that...B.S. if you ask me.
If I use my cheap as chips 1g formula based on historical average growth rate and current years underlying projected earnings $56m (24.34 cps) and assume long term the risk free rate reverts to a more normal level of 4.4% I get v = 24.34 x (8.5+ 44) = $12.78.
Conclusion - I reckon the stock is very cheap and people are not understanding the outstanding growth rate that's being achieved and that's likely to be achieved going forward.
Bias / Disc: I own.