event today?, page-6

Persistentone:

Your technique is basically focused on PE Ratio but I think what I previously suggested is more than that.

ROE/PB=7%, that's correct. But it is just the other way of P/E ratio.

ROE/PB=(Earnings/Equity) / (Price/book value per share)
note:book value is equity

so ROE/PB=(Earnings/Equity) / (Price/Equity per share)
ROE/PB=(Earnings/Equity) / (Price* # of shares/Equity)
ROE/PB=Earnings per share/Price=1/PE Ratio.

thus,mathematically, ROE/PB=1/PER.

However, the way I used in the previous post is to modify the price we might pay now, considered the huge cash position FLT currently holds.

By the way,base on the Free Cash Flow numbers provided in morningstar.com(no ".au"), u will find FLT generates FCF over 10 yrs at a compounded annual growth rate of 14.5%.

simply very conservatively apply a compounded annual growth rate of only 2% in the next ten years for its FCF and then 1% forever and, use the discount rate(IRR) of 10%, then discount them back, u can still find its intrinsic value of at least $30.5 to $34 per share.

So $20 compared to $32 is a huge 37.5% discount to its intrinsic value.

morningstar.com link for Flight Centre:
http://financials.morningstar.com/ratios/r.html?t=FLT®ion=AUS&culture=en-us