I am a bit conservative in factoring in large growth expectations. Book value for most companies is not the right measure as the value of services companies or technology companies lies in intangibles like quality of people, management, brand, etc. Having said that how the company is performing is always measured in terms of ROE or ROCE which is again measured against book value. According to Buffet, you should track ROE every year to know if the company is good or bad not only earnings growth.
I learned from Buffet that this is the model he uses to assess even brands like he bought Kraft Heinz for example Kraft Heinz was a 120 % ROE business then you can pay 10 times the book value it becomes a 12 % return for you.
Everyone says BFSI company’s Book value is the right measure but I do look at Book value for even services companies.
So I am not great at paying high multiples as I need to be very sure high growth will sustain for 10 years. All my mistakes were paying fair value to companies in 2017 but some people can identify Varun or Kaynes and ride the whole journey.
Your returns will equal to ROCE over long period of time if Multiples remain same
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