ya in terms of valuation you have Deere averaging like 15% eps growth a year for 20+ years trading under 10 times. And Terex a way worse financial position with unpredictable growth trading at 17 times forward.
It's pretty illogical to bet on the king here!
I think Terex is just really bad at guidance. In 2008 they UPOD'd like crazy in 2013 they blew it.
I think the business is just somewhat unpredictable. Overal great business not really a great stock at $43 after missing all the financial goals so far. Hard to really trust them hitting any numbers going forward. At the same time management gives great color.
first of all Q4 was not amazing given their prior guidance.
Forward looking guidance is interesting since they said they would make essentially that exact amount in 2013. Had they said $4 at least we would know they could get $3.
Terex isn't the best company in the world in terms of delivering. But they try hard!
This isn't to say Tex is overvalued just that there are way better deals than buying something trading at 17 times forward
Last year they said $2.4-$2.7 I sold out in April because it was clear they wouldn't hit that. This year they say $2.5-$2.8. Does anyone honestly believe they can go from $2.8 to $5? in 2015. The valuation is just absurd when compared to other companies at this time.
I just don't get it.
Cats numbers were poor as were mtws. I think cat said they would stagnate . mtw said top line and margins would modestly improve . TeX will be interesting
I think every quarter this year revenue has declined. It was something that told me the 2014-2014 objectives are in doubt. And the stock was at 30-40 and the objective were only for like $3-5 a share. So the upside here is pretty limited. For me there are much better deals to be had. Though I love the tex products and management. Not many companies give better guidance and explanation of their business.
Though I am excited to hear their 2014 guidance coming out soon. Obviously I would need a pullback to re-enter TEX. The risk reward is to high for me at $40 or $35.
PNC's valuation if they could grow at 16% a year and pay 0 dividends would be $192 according to my model and 92 with 100% dividends.
reduce 5% or add 5% for each 10% .
Lol so 70% add 0% 80% payout reduce 5% 90% payout reduce 10% 100% payout reduce 15% and vice versa going down.
Dividends actually lower intrinsic value!!!!!! Which is kind of funny.
However you also want dividends if the bank can't grow their earnings. If they can dividends are bad. If they can't they are good and increase intrinsic value.
Apparently copying and pasting anything gets ure thread deleted.
Anyways you can find my new post here. It basically explains the valuation of all banks and stocks in general
All right I think PNC is still undervalued by 40% or so. A quick way to value banks is take their Return on tangible equity .PNC's I calculate in 2014 will be 15%. (I exclude core deposit amortization of $200M) and going forward I calculate PNC"s ROTE will be around 17%.
Return on tangible equity is net income / beginning tangible equity. I use beginning equity since it plugs into my model better. Average is technically more precise but beginning works perfectly.
Anyways here is my quick formula.
Take tangible equity so PNC 28 billion
Multiiply that by (Return on tangible equity / discount rate) So PNC average about 16. I calculate their discount rate to be around 7.5% based on their preferred share payments and stock market experience.
So 16/7.5 multiply that by 28 billion so that is 60 billion.
Then an advanced part is to adjust based on the payout ratio. IE if you can return 16% a year and payout $0 in dividends and continuously grow at 16% than you're more attractive than if you can grow at 16% but you pay 100% in dividends.
So I would set the base level for the banking industry is like 70%.
However multiply the $60B by 5% at 60%, 10% at 50% payout, 15% at 40% etc And do the opposite going down.
So this is a quick way to do my more advanced banking formula but it will get similar results to my formula.
So USB for instance had tangible equity last quarter of $26 B (3Q) Common shareholders earned $1,389 this quarter or (1389 X 4 5,556 and 5,5556/ 26000 = a return on tangible equity of 21%.
So multiply their tangible equity by 26 X (21% /7.5% discount rate) which equals 72.8 B then reduce it by 5% for each amount their payout ratio is over 70% so about 15%.
So I think USB's intrinsic value quickly calculated is 62 B.
However the market is less advanced than me and doesn't penalize USB for their inability to grow over time. In the year 2000 I think WFC and USB were the same size now WFC is like 6 times bigger. USB banks for metrics
I don't get how a company with a limited dividend and clearly limited top line growth deserves a 22 forward PE.
Bottom line really can't be grown much further. This is kind of an absurd valuation especially given the negative tangible equity of the company.
Their results stink and they basically said 2014 would be flat. Not much growth. Makes you really wonder about the market at times.
If I was picking prices for all stocks I'd say MTW should be flat based on today's results. Modest revenue growth in cranes. High single digit in food limited margin expansion in each. Nothing special
I think their claim is pretty frivolous but I don't have time to waste going to trial.
My posts essentially say why are they raising equity when they have money in the bank. And their strategies are consistent with companies who are fraud.
Though I never said it was it was merely consistent. However I think it is ridiculous that someone could get libel for this.
Have you heard of anything in the U.S. based on this?
ya I am still going through PNC. I got sidetracked yesterday some company is suing me for posting "defamatory" things on a message board.
Any advice? I questioned their capital allocation strategies. It is a pretty weird suit.
See USB reported today they have all the best metrics but they only grew earnings 5% this year despite have a 15% ROE. It shows they don't try to grow and they manage for metrics. ERGO their high PE relative to the sector is undeserved.
A company paying 0 dividends that can have an ROE of 11% on equity is more attractive at a company with an ROE of 15% paying 100%. SInce over time the 11% gets compunded while 15% stays the same every year. That is USB but investors haven't realized this in 13 years making it the darling of the financial markets.
When did I mention that? I am still going through the Q4 earnings report. For COF I think its worth $95-$100 so probably a better deal after PNC has gone up 7% from earnings. However I haven't yet figured out how PNC will do next year in terms of non interest income and expense. I should be done that tonight or tomorrow.