Originally Posted by
BlackPeter
Cheers bull - great post and thanks that you did show us what you see. Keep it up!
Not sure I consider myself a "fundamentalist" more a "balanced" person ... but hey - here is in a nutshell what I see from a fundamental perspective:
forward PE: (at 10.75 and based on 4 traders analyst consensus): 29; Obviously a risk if & when PE contraction starts (some say it did already);
CAGR: huge, but hard to capture given the immense jumps. Lets take 50 as backward (revenue) CAGR. EPS CAGR is still ways higher, but clearly not sustainable, i.e. in my view just describing the past.
The big issue here is that we can't really use these numbers for any future projections - given that they describe the agility of a small antelope (which ATM used to be), but not the future movements of a elephant turning into a mammoth. Elephants don't gallop ;).
FY16 growth 127%
FY17 growth 56%
FY18 growth 67%
FY19 growth (predicted): 34%
FY20 growth (predicted): 23%
Anybody noticing the trend?
Looks like the 50% CAGR is history as well. So - big question is - what would be a sensible assumption for future long term growth?
Get this number right - and your fundamental assessment will be spot on ;)
If we take the growth out of the equation, than the share would be worth something like 10 PE - $3.71; Obviously - we do have growth, so halt your flogging and take this just as a base number.
If we take Rogers modified Graham formula and assume 10% sustainable growth, than the share value would be $7.42;
Still too conservative? Make it 15% sustained growth: $9.27
And for the optimists - here is the result based on the original Graham formula and 15% growth: $14.28;
Given the huge unknowns about future market growth, competition (margins shrinking) and the science around A2 did I not bother to do a DCF. Garbage in - garbage out.
From experience - if a share is priced close to its Graham value, than there is not that much upside potential left ;) but obviously - increase the growth assumptions and the sky is the limit.
Still - if I may says so - the bears have in my view a bigger chance of winning this contest ... despite A2 being a good company.
Discl: not holding and cancelled my buy order at $9.50. Analysis is good.