Buggy Human
Without planning to, I ended up sharing our luddite valuation approach in a hotchpotch of tweets. I thought I’d gather them in one place. Before that, what you choose to own matters way more than what you choose to pay. But valuation matters & we’d like it to be a tailwind.
Over 15-years & ~40 decisions, our average/median is 15x entry PE (on historic/trailing E) for 40% ROCE business.
15 is outcome. Approach is, if multiple starts with 2, better be very special. Starts with a 3, I should be fired.
Normalized, especially if cyclical business (we take 5-10 Yr avg). Adjusted down if margin above trend.
If over cycle numbers clear our bar & we’re convinced of future sustainability of decent economics, it’s OK for recent numbers to be poor due to external factors
PE is a valuation heuristic, amenable to getting historic reference ranges. Our more basic criterion is having a reliable sense for future cash without xl jugglery.
https://twitter.com/sridharananand/status/1568431893024219137?s=48&t=2Hh36SvEl8QnwxucRKEehw
| Subscribe To Our Free Newsletter |
