The model works on how much years it takes to earn back the original investment. If I have invested Something at 200 rupees (10 rupees profit / 20 PE) and if earnings compound at 10 percent for 11 years, you'll earn back your original investment in 11 years.
Excellent thought process and outlining of the continuous growth model. It is perhaps one step removed from being close to the “holy grail” - valuation premium / discount factors due to purely share ownership / market reasons (may not be directly related to YoY financials) like free float, pledges, trends in ownership of the supposed “smart money”, etc. I understand this is difficult to “model”, but that’s the missing link between what excel things and what the market thinks. I also see how you may say PE is supposed to do this, but as we all know PE rations (and other pricing ratios) are seldom accurate
If you agree, happy to collaborate to think through how this gap can potentially be bridged.
can you explain what's the logic behind this... A company growing at 10% trading at 20 pe will take 11 years to earn back the original investment?
The model works on how much years it takes to earn back the original investment. If I have invested Something at 200 rupees (10 rupees profit / 20 PE) and if earnings compound at 10 percent for 11 years, you'll earn back your original investment in 11 years.
Excellent thought process and outlining of the continuous growth model. It is perhaps one step removed from being close to the “holy grail” - valuation premium / discount factors due to purely share ownership / market reasons (may not be directly related to YoY financials) like free float, pledges, trends in ownership of the supposed “smart money”, etc. I understand this is difficult to “model”, but that’s the missing link between what excel things and what the market thinks. I also see how you may say PE is supposed to do this, but as we all know PE rations (and other pricing ratios) are seldom accurate
If you agree, happy to collaborate to think through how this gap can potentially be bridged.
Hit me up on cashcowsindia@gmail.com with some ideas and we can work on it.