"Not really, a company which can maintain a high ROE...

"Not really, a company which can maintain a high ROE indefinitely is worth an infinite amount of 'money'. Unless you use the available ROE it becomes a totally arbitrary exercise in valuating any given company. A bit like gambling one could argue."


The point is that it's not conservative to assume that Matrix can maintain a 50% ROE whilst reinvesting 90% of their profits.

I don't follow your point that a company that can maintain a high ROE indefinately is worth an infinite amount of money, care to explain?

If you use an unsustainably high ROE & low POR you will inevitably overvalue a company. I don't see how using a sustainable forecast ROE & POR is gambling (read: lower ROE/higher POR). To the contrary, you would be providing a larger margin of safety.