"OK- the SP of REH has gone nowhere for the last year,"
In the field of study of statistics, there's a quaint little saying that goes like this:
"
If you torture any data set hard enough, you can get it to confess to any crime of your choosing."
For example, since this inauspicious post of yours - made just a month ago - that somehow attempted to draw some sort of correlation between the intrinsic value of an enterprise and how frequently its listed securities change hands (to wit: "
any share that trades at $41 with a market cap the same as Dominoes and only gets 65 trades for the day, with 75% being single dollars, has issues" -
https://hotcopper.com.au/threads/an...3652926/page-25?post_id=27257247#.WePW7GhL-Uk ) - the stock price has risen to $44.30 (if you include the 71c dividend that has accrued in the interim).
So that's a 7.5% investment return over the past month, or on an annualised basis, 90%pa.
Pretty neat, huh?
"the PE of 20 is ridiculously high"
Funny, when I first acquired shares in REH almost 15 years ago, the P/E multiple I effectively paid was not far off that level, too. Yet that didn't stop the share price rising almost tend-fold over that period.
Why is that, one wonders?
I suggest to you that it is because the P/E multiple that you are so crudely applying might be causing you to be seriously misled, because it is somewhat irrelevant as a measure of valuation in REH's case, due to the relatively rare capital structure of the company (did you know, for example, that Issued Capital is a mere $9,960,000, and has been unchanged for some four decades?), and its superior return on capital metrics, coupled with the the long-duration nature of the growth in its Revenue, Profits, Cash Flows and Dividends?
Instead, maybe EV/EBITDA will give you a better feel for the real valuation of the business.
Of course, if you want to get really funky, you could try out the Capital Asset Pricing Model (CAPM), which links the share price (in terms of Price-to-Book Value) with the financial returns the company generates. (I assume you are conversant with CAPM?)
To that end, check out REH's valuation in the context of the following:
View attachment 775812
What do you reckon? Valuation still "ridiculously high", do you think?
"the divvy is way too low on payout ratio"
Here I disagree with you again, but for differing reason.
For me the dividend is actually
too high.
The payout ratio should be zero.
Do you have any idea whatsoever why I would say so?
"..
.the acquisitions are at best debatable and almost sound desperate."
In order for one to have a firm opinion on the quality of the acquisitions made by REH, one would need to know what considerations were paid for said acquisitions and the sorts of multiples they paid for them. To that end, could you substantiate your view, especially in relation to the most recent one, the one that gives them exposure to the pending infrastructure boom?
(20min delay)
