Valuation Introduction估价介绍.pptVIP

Ways of Estimating Growth in Earnings Look at the past The historical growth in earnings per share is usually a good starting point for growth estimation Look at what others are estimating Analysts estimate growth in earnings per share for many firms. It is useful to know what their estimates are. Look at fundamentals Ultimately, all growth in earnings can be traced to two fundamentals - how much the firm is investing in new projects, and what returns these projects are making for the firm. I. Historical Growth in EPS Historical growth rates can be estimated in a number of different ways Arithmetic versus Geometric Averages Simple versus Regression Models Historical growth rates can be sensitive to the period used in the estimation In using historical growth rates, the following factors have to be considered how to deal with negative earnings the effect of changing size Arithmetic versus Geometric Growth Rates Year EPS Growth Rate 2000 1.50 2001 1.20 -20.00% 2002 1.52 26.67% 2003 1.63 7.24% 2004 2.04 25.15% 2005 2.53 24.02% 2006 2.23 -11.86% Arithmetic Average = 8.54% Geometric Average = (2.23/1.50) (1/6) – 1 = 6.83% The arithmetic average will be higher than the geometric average rate The difference will increase with the standard deviation in earnings The Effects of Altering Estimation Periods Year EPS Growth Rate 2001 1.20 2002 1.52 26.67% 2003 1.63 7.24% 2004 2.04 25.15% 2005 2.53 24.02% 2006 2.23 -11.86% Taking out 2000 from our sample, changes the growth rates materially: Arithmetic Average from 2001 to 2006 = 14.24% Geometric Average = (2.23/1.20)(1/5) = 13.19% Dealing with Negative Earnings When the earnings in the starting period are negative, the growth rate cannot be estimated. (0.30/-0.05 = -600%) When earnings are negative, the growth rate is meaningless. Thus, while the growth rate can be estimated, it does not tell you much about the future. The Effect of Size on Growth Year Net Profit Growth Rate 2000 1.80 2001 6.40 255.56% 2002 19.30 201.56% 2