going north, page-7

"Thats a huge forecast. I agree on CCL being a magnificent company, what are your assumptions?"

Correction.
CCL is becoming a decent company.
Didnt use to be.

Without going into a 10,000 word valuation essay, have a quick look at CCL's 'Financials' page in Commsec, and in particular the Return on Capital, and Return on Equity trends for the past 10 years.

For those of us who concentrate on long-term business fundamentals as a guide to investment, a key metric is the underlying profitabilty of the company. As a rule of thumb, you can assume that long-term shareholder returns converge to the underlying company's Return on Equity.

Back to CCL. For the best part of the past 10 years CCL's return on Equity was 5%. Would you ever want to be in business when every dollar you invest in assets returns 5% ? No. You would rather put your money in Term Deposits.

Therefore CCL has gone from a Value destroyer, to a value creator.

Thats a good start. You now know that CCL generates cash in excess of what it needs to fund its capital requirements, and that ensures it can return cash to its shareholders.

Better still, now that the company makes a decent return on the funds it employs, does it have profitable growth options ?

This is where your business intuition comes into play. We've seen CCL acquire brands such as IXL spreads, SPC and Goulburn Valley, Water brands, Grinders Coffee, new product launches, alcohol distribution deals, etc.

The initial evidence is that CCL has been able to leverage its unique distribution capability (have you ever been to a shop which doesnt sell Coke ?) to enhance the value of new brands.

Has the world run out of further such profitable expansion options for CCL ?

I reckon not.