Jubilant Foodworks -
CMP 434
TTM EPS 3.34
P/E 130
3-year avg PE 98
Discount rate 13% (since this is giving me 16% implied growth that you mentioned)
At 13% cagr, expected price = 434*1.13^10 = 1473
If exit PE is 98 (3 yr avg as you mentioned), exit EPS must be 1473/98 ~ 15
EPS needs to grow at 16% cagr to reach 15 from 3.34 hence implied earnings growth rate is 16%.
But…
In my view, this is not wise to expect 3 year avg PE as exit PE at year10. You can look for Gordon Growth model and check the math for yourself. Basically what it says is that after 10 years, you’re expecting the company to grow at 12% forever. Even if I believe it can grow at 8-9% in perpetuity, at 13% discount rate, it does not warrant an exit PE of more than 20-25.
Once you do that, implied earnings growth is 33%
Check out Mauboussin’s base rate book to see how many companies have grown at that rate.
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