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Intrinsic Value |
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Grafton |
Ryanair |
IAWS |
C&C |
AIB |
CRH |
Kingspan |
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Latest Share Price |
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€10.67 |
€7.72 |
€14.45 |
€7.75 |
€18.85 |
€26.85 |
€13.45 |
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Latest EPS (cent) |
|
66.4 |
35.1 |
71.9 |
24.7 |
144.8 |
186.9 |
64.8 |
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P/E |
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14.6 |
18.5 |
19.9 |
22.8 |
12.3 |
12.4 |
19 |
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| 1. Assess the intrinsic value of a
business |
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| First, calculate the historical growth
rate in earnings. |
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2003 to 2004 |
24% |
-5% |
17% |
4% |
8% |
21% |
30% |
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2004 to 2005 |
21% |
18% |
16% |
31% |
14% |
15% |
40% |
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| ** 2. Put a Value on likely future
earnings |
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14% |
18% |
14% |
20% |
15% |
18% |
15% |
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Based on historical EPS |
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| 3. Calculate estimated Share Price |
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EPS Value in 2011 (cent) |
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(based on likely future earnings) |
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127.85 |
80.30 |
138.44 |
61.46 |
291.24 |
427.58 |
130.34 |
| ** |
Assumed Multiple (Based
on sector) |
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|
12 |
20 |
15 |
20 |
14 |
14 |
18 |
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Predicted Share Value in 2011 |
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|
€15.34 |
€16.06 |
€20.77 |
€12.29 |
€40.77 |
€59.86 |
€23.46 |
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| 4. Calculate Return On Investment |
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Assumptions |
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Buy Shares and Hold for 5 years |
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Buy Feb 2006 inc 2% fees |
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€10.88 |
€7.87 |
€14.74 |
€7.91 |
€19.23 |
€27.39 |
€13.72 |
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Sell Feb 2011 less 0.5% fees |
|
€15.26 |
€15.98 |
€20.66 |
€12.23 |
€40.57 |
€59.56 |
€23.34 |
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Assume Dividends (cent per yr) |
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0.14 |
0 |
0.08 |
0.13 |
0.75 |
0.17 |
0.14 |
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Rate of Return |
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8.15% |
15.20% |
7.47% |
10.29% |
18.69% |
17.21% |
11.92% |
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To get an IRR of 12%, we could buy at ; |
|
€9.18 |
€9.07 |
€12.02 |
€7.33 |
€25.31 |
€34.31 |
€13.67 |