The General had noted, in the course of doing his regular end-of-the week statistical summaries, that the consensus research opinion regarding SIVB's 5-year forward-looking CAGR in EPS was raised 8.67% last week, from 15.0% to 16.3%. As such, it is the highest it's ever been since the General began monitoring SIVB in the final trading week of 2000, ending on 12/29/00, when it was @ 16.1%. The General is aware that prior to that, it had been higher than 16.3%.
For the non-obsessive/compulsives among the readership of this mb who don't bother with such minutia but might be interested in the ebbs and flows of that consensus CAGR over the past, say, three years (in light of what market conditions might've been during this period), here is a summary showing the week-ending date and the associated CAGR that was applicable or became effective a/o that week-ending date.
It is reasonable to expect that in projecting a future EPS for SIVB five years out, some guesstimate has been made by the analyst regarding the applicable shares then outstanding (S/O), whether it be more than at present or possibly less (such as if a stock repurchase program might be instituted during that period).
The consensus opinion for FY04's EPS is currently $1.65. Disregarding the possibility of any stock splits taking place which would be reflected in an inverse relationship as far as EPS is concerned, here is a comparison of FY04's (only 4� months away) $1.65 being compounded for 5 years @:
a) 15.0% = $3.32 b) 16.3% = $3.51
For those who like to fantasize, if you were to ascribe a PEG Ratio of 1.00 to SIVB, implying a P/E multiple of 16.3x, your target price in 2009 would be:
$3.51 x 16.3 = $57.22
At today's closing price of $35.59, SIVB's P/E, based on FY04's $1.65, is a multiple of:
$35.59 � $1.65 = 21.57x
Were Mr. Market to accord SIVB with that order of multiple in 2009, the target price could become:
$3.51 x 21.57 = $75.71
And we all have learned how 'accurately' analysts can read into the future. :-(
For those readers who hadn't noticed, following the company's earnings report of 4Q04 & FY04 results last Thursday, 1/27/05, the analysts' consensus opinion for SIVB's 5-year, forward-looking CAGR in EPS was raised from +16.3% to +18.8%, an increase, this time, of +15.34%.
The previous time said consensus was raised, was about three weeks after 2Q04's earnings had been reported on 7/22/04.
For the week-ending 8/13/04, it went from +15.0% to +16.3%, a gain of +8.67%. This time the % gain is +76.97% greater.
The General brought that matter to the attention of this mb on 8/16/04 via message #1958 (to which this message 'replies', at the bottom). The General directs the reader's attention to #1958 for some historical background about SIVB's CAGR history for the past 4+ years, since the General first began monitoring the stock.
Beginning with FY04's recently reported EPS of $1.74, applying the new CAGR of +18.8%, the EPSs for the fiscal years indicated, are reported to the nearest mil as follows:
(Note: Comparative current consensus EPS estimates for FY05 & FY06, taken from SIVB's Analysts' Estimates page are shown in parenthesis following the calculated EPS figure, based on the +18.8% CAGR.)
In the closing portion of message #1958, the General played around with some numbers in an attempt to project SIVB's possible price in 2009, predicated on the (then) newly revised CAGR of 16.3% and the consensus data then available from SIVB's Analysts' Estimates page.
The two "approaches" taken at that time yielded target prices of $57.22 and $75.71. To put things in perspective, SIVB had closed on 8/16/04, the day of said posting, @ $35.59.
Predicated on current Analysts' Estimates data & the newly revised CAGR, here're the target prices for 2009 that the same "exercises" with numbers yield:
a) PEG Ratio of 1.00 metric
Implied P/E = 18.8x FY09's EPS = $4.117
Target Price = $4.117 x 18.8 = $77.41
b) Using the current consensus estimated EPS for FY05 of $2.21 to derive a current P/E:
Closing price on 1/28/05: $42.96 EPS: $2.21
P/E = $42.96 � $2.21 = 19.44x
PEG Ratio = 19.44 � 18.8 = 1.03
Target Price = $4.117 x 19.44 = $80.04
c) Substituting the CAGR-projected EPS for FY05 of $2.067 to derive a current P/E, we get:
P/E = $42.96 � $2.067 = 20.78x
PEG Ratio = 20.78 � 18.8 = 1.11
Target Price = $4.117 x 20.78 = $85.57
d) And lastly, using the ttm EPS of $1.74 to determine a P/E multiple, we get:
P/E = $42.96 � $1.74 = 24.69x
PEG Ratio = 24.69 � 18.8 = 1.31
Target Price = $4.117 x 24.69 = $101.66
So, comparably, in the past 5� months, the equivalent methodology's Target Price(s) for 2009 have changed as follows:
Example A: $57.22 ��> $$77.41
Example B: $75.71 ��> $80.04
And, for those Longs who'd rather pin their expectations on even greater appreciation, we offer $85.57 up to $101.66.