S2O Investing Forum: Questions

Value Price Growth Rates incorrect?
posted Jan 05 '21 by napoleonsi

Value Price Growth Rates incorrect?

Value Price Growth Rates displayed in the popup box when clicking the equity growth rates button do not seem to match up with the annual statements. Am i missing something here?

I would assume they should match one to one.

For some items i just can't tell where those numbers come from. But for ROIC for example they seem to use the actual ROIC rather than the ROIC growth rates which i assume they should use.

If these numbers are used to calculate the future EPS growth then won't the fair value be calculated incorrectly?

I think you have confused two growth grades we have in the S2O Stock
posted Jan 06 '21 by alex

I think you have confused two growth grades we have in the S2O Stock Analyzer. Stock2own computes two Growth Grades:
- Historical Growth Grade is based on historical growth rates and gives you a sense of how fast the company is growing.
- Year-over-year Growth Grade (YOY Growth Grade) is based on year over year growth and shows how consistent the growth is.

We are using historical growth rates for value price calculations and year-over-year growth is available in Financial Statements section.

The only exception is ROIC - it is always the same in both views and it is ROIC itself, not the growth of the ROIC. The reason behind that is very simple - in general, we want to see growth in company equity, EPS and other major characteristics. The benchmark we usually use (as recommended by many great investors, including Phil Town) is 10%. So, we want EPS to grow at least 10% every year, right? But when we analyze ROIC, we usually analyze absolute value since it is already a ratio. So, we want ROIC to be at least 10% every year. Not a growth of ROIC, but ROIC itself. Therefore, it is presented as an absolute number.