I’ve recently calculated the sticker price / fair value price for some of the top picks of year 2013. The calculation is solely based on certain key data retrieved from different financial sites. As the ratios or estimations found for each counters may vary according to analysts, the result could be very subjective.
Key numbers required in the calculation are Current EPS, EPS Growth Rate, Future PE, Min Acceptable ROI (%), Number of Years. For more information on how to get EPS Growth Rate and Future PE, you may refer to earlier post here. As for Min Acceptable ROI (%) and Number of Years, my preference would be minimum 15% return in 10 years and hence the numbers are always set as 15 and 10 respectively.
Calculation could be done manual using excel / your very own desk calculator or making your life simpler by using tools / services. There are plenty of valuation tools or utilities provided in the market to estimate fair value price. Some of them are offered to public for FREE provided you sign up their sites. The calculator utilised here can be found in Phil Town’s site, the author who introduced Rule #1 as well as sticker price. There are plenty other valuation tools and calculators provided in the site besides value price calculation. All you need to do is throw in the key numbers requested by the calculator and you will get the answer in just a few clicks. It’s totally hassle free!
Now let’s look at SKPETRO, the key data are shown in table below:
Key in data step by step required by the calculator and voila ~ here’s what we get for SKPETRO:
|1. Future EPS||0.44|
|2. Future Value||12.76|
|3. Sticker Price||3.15|
As of time of writing, the last closing price of SKPETRO is 3.07, very close to calculated sticker price of 3.15, which also indicates that the current price is way above our margin of safety. If we are aiming at 15% return per year, it is advisable to wait for the right opportunity to move in, most likely after 13th General Election.