With about 150 million in book value or equity let's start our calculations.
Panera Bread (PNRA) kicks off about 2.8 million in free cash flow. Again, in reality that number is a lot less. Remember, my definition of free cash is just that, cash you can actually take out of the company. Current Market Cap for PNRA is 902 million. Got that Cherry?
Let's start. Let's multiply current free cash by 20 times what is currently is. So 2.8 million times 20 is equal to 56 million. If you think Panera bread can grow faster than 2000% then I can rework this for you Cherry. So we have 56 million, let's assume it can sustain this type of free cash flow for the next 15 years. Got it? Good. That would give us a present value at a 12% discount rate of 381,408,411 dollars. That's a big number don't ya think? let's double our equity value from 150 million to 300 million and add to that the 381 million in discounted cash flows. We get a grand total of 681 million. what was the market cap for Panera again? Oh yes, 902 million.
So Cherry, when exactly would Panera bread become a good purchase for you? Oh I forgot, you weren't recommending this stock, just talking about it as a good company. You wanted the price to go down a little first. How much were you expecting it to go down? 10%? 20% 50% ...... Grow up Cherry and realize when you are in over your head.
This valuation stuff you said is JUNK!! Yu make lots of big gesses about the future and do it for 15 years!! Nobody but realllllllly long buyers are gonna care about 15 years!!! Bring it bak by 12%??? Why not 2% like it is the last couple years??? That makes the picture lots different, dont it????? Outside one or 2 on this board, a couple years is tops!!!! Growin 40% with 2% discount makes it worth lots more, right????
You must also believe in little green men from mars, 'cause Shaich has played one of his masterful roles on this one. He hit a trend beautifully & gave the market a growth story in a time where tech investors/mighty mo' and other insundry ilk were looking for ANYTHING that wouldn't go down. Congratulations to him for rising like a phoenix from the Au Bon Pain ashes. Where we go from here (at this valuation) is an entirely different situation.....Good luck to all....
Panera uses substantially all of its cash flow to build new stores. Accordingly, free cash flow is very low. If they stopped buiding stores, you would value the company alot higher, Makes alot of sense.
"Accordingly, free cash flow is very low. If they stopped buiding stores, you would value the company alot higher, Makes alot of sense."
-- Actually its makes no sense whatsoever, and your 'logic' is downright scary. If PNRA stopped building stores, the stock would absolutely crater since at this VALUATION the EXPECTATIONS is for growth to da moon (& IMO PNRA STILL discounts the successful build-out of all of China).
I have waited patiently for this day, and expect more like it to come. Just think of how many brokers flogged this overvalued stuff to 'unsuspecting/trusting' clients!! Think of the panic that will/is setting in.....Think of all the shares Shaich & gang have unceremoniously dumped......Think of all the additional hurt PNRA would have caused if its stock was to rise one iota from its all-time highs.....What's going on is good for the future of PNRA, good for the wellbeing of unsuspecting investors, & good for the country. Horrendously overvalued stuff should not be rewarded (or 'allowed' to suck up funds that could be used for true growth elsewhere). All JMHO...Good luck to all.....
I look at in a much simpler manner. SSS rate of growth is declining. New stores as a percentage of installed base is dropping, too. This has to translate into a lower rate of top line growth. 30% is a thing of the past, 15-20% may be more like it.
Then there is the risk factor. A bad month of comps and the reality of the end of the gravy train will become blatantly evident. Then you'll see Panera dropping to meet its peers.
While it is probably not your cup of tea if you want a long to look at with its best growth years ahead try BLTI (you can see my posts on ther since '98)