22 Comments

A mathematical question: how do you get to the -1.7% contraction? I know it’s (new-old/old), but i don’t understand the 0.1.

Thanks you!

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It's because we estimate that the valuation will normalize in 10 years. That's where the 0.1 comes from :)

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With the Earnings Growth model, are you usually conservative with the multiples?

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Absolutely.

Better to surprise on the upside :)

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That was very easy to read and follow, Pieter! Well done! 🙂

I need to re-read this and run through the exercise in my journal to have the lesson glue itself to my brain. 🖋️

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Always feeling blessed to see you here, Boris!

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thanks for sharing this simple and valuable model

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It's a true honor!

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Thank you for continuing to write these in a simple, straightforward way.

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It's a true honor, Gary!

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Thanks for detailing the model. Always helpful to see how others value companies.

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I appreciate you, Joel!

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I would replace Dividend Yield with Total Shareholder Yield, which includes share buybacks and debt payments.

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Buyback is included in the EPS Growth. That's why we just use the dividend yield.

Otherwise you would include the buyback yield twice. :)

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How did you get that the fair P/E was 16x ?

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Yeah I couldn’t figure how the P/E ratio in example was 16x either.

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Think it’s just an assumption he was making as an illustration

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What The Curious LP mentions is correct.

To determine a fair Exit PE, the Microsoft example provides more guidance

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Ok i see it now! Sorry! You are dividing the multiple compression over the 10 years to smooth it out. Thank you for explaining.

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Exactly!

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So then if it’s 9 years it’s 0.09? Sorry for the questions?!

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Than it would be 100/9 :)

When it would be 5 years, you multiply it by 0.2x

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