Estimating Growth Rate

March 12, 2020

Q & A › Estimating Growth Rate
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ERIC KHOO asked 3 years ago

When I do Estimating Growth Rate and my results are as follows:
a. CAGR of Net Profit = 24.55%
b. CAGR of Average Profit = 20.67%
c. ROE x Retention Rate = 9.87%
Q1. Is it possible for “c. ROE x Retention Rate” to be so much lower?
Q2. Logically, I should use the lowest % to calculate the Intrinsic Value?

1 Answers
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KCLau Staff answered 3 years ago

Q1 – Yes. It can be because method A & B use a particular point of time.
Q2. Use the lowest one, and be conservative. I might reduce it further depending on the nature of the business, and the future outlook.

ERIC KHOO replied 3 years ago

Thank you