Module 3

Q & AModule 3
Chiam asked 4 weeks ago

Hi KC / Peter,
I tried to redo valuation for Padini using latest data from Chartview. As of now, it seems that Padini is still fulfilling the conditions as of a good company. At the final step to determine if the price is a fair value, I see that the Implied EPS Growth is negative. Mathematically, I think it’s because the current EPS is already way more than estimated EPS. What does this mean financially? 
Sorry, I’m really newbie in finance / stocks.
This is the Google Sheet link where I put in the numbers:
https://docs.google.com/spreadsheets/d/1fgAZvVEbynXZArWWJNSakLgM4CFTwE7W_faxALTZJqQ/edit?usp=sharing

3 Answers
KCLau Staff answered 4 weeks ago

Hi Chiam,
I looked at your spreadsheet, and you only use the PE in your valuation.
I don’t quite understand your question:
” I see that the Implied EPS Growth is negative. Mathematically, I think it’s because the current EPS is already way more than estimated EPS. What does this mean financially? “

What do you mean by that?

Try go through the checklist by following the links here:

How to Submit Stock Analysis

Chiam answered 4 weeks ago

Hi  KC,
I have just started and watched ‘Example of Good Company’ and I think not yet ready to submit stock analysis. Basically, I’m just going through the example exactly and compare if I do it correctly on my own. The problem was at the last step, the example (at that point of time) was the price (5.38) is still considered higher because it’s quite challenging to reach estimated EPS of 0.45 (P/E 12x) as company needs to have 87% growth of EPS from the current EPS 0.24. The current EPS now is already 11.42, so how to calculate growth? Is it that this company is not within preferred option based on P/E or EPS in the first place?

KCLau Staff replied 4 weeks ago

Question: How to calculate growth?
In the case of Padini, due to covid-19, there could be no growth for a year or two, until it is back to normal. I would assume no growth until further development.

Padini is a good company. But how the current situation is going to affect its business, you will need some judgement that none of us will be accurate. If it is too hard to see its effect, I will normally treat it as “too hard to know” and will skip.

Chiam answered 4 weeks ago

Hi KC,
Thanks for your feedback. Noted on your clarifications, perhaps not all valuation can be ‘calculated’. May be I need to go through more examples.
Thanks again.