Calculating Intrinsic Value – Market multiples

In an earlier post, I discussed the PE ratio and how investors calculate it and use it as an indicator of value. The first part of this post will look at how the PE ratio is used as a multiple to calculate value. There are other market multiple ratios that are used including EV/EBIT, EV/EBITDA, EV/Sales, and those are just a few. With both PE ratio and other market multiple ratios, its important to remember that they are “relative” ratios, so they are generally used to compare a company ratio to similar market multiple ratios of companies in the same sector, different sectors and the overall market ratio. The issue is that the market as a whole may be expensive, so these ratios can be misleading.

Free template to analyse companies?

Yes its free! An Excel template for you to analyse industrial type companies, whether they are in Australia, US, Europe, Africa or Asia. It also includes several valuation methods and my own personal company ranking system. You might ask why I’m giving this away, which is a fair question. The main reason is that I can’t analyse every company, I just don’t have the time. By giving out the template, the community as a whole should be able to improve upon it and at some point in the future, we can collect templates for many companies and add them to the site for everyone to share.

Austock Portfolio versus My Model portfolio – Update 18th Aug 2011

Its been over 4 weeks since I last reviewed the performance of the two portfolios. In this blog I’ll give you an update on how both portfolios are tracking. As at the 18th August 2011,the Austock portfolio is down $26,500 or 8.85%. Compared to the ASX 200 index which has fallen 7.68%, meaning the Austock portfolio is not even beating the index! In fact its -1.16% behind the index. Only 4 stocks in the Austock portfolio still have positive returns. The Austock portfolio is also benefiting from the takeover offer for Connect East (ASX:CEU). If it wasn’t for that one stock, the Austock portfolio would be lagging further behind.

Compare this to my model portfolio which is down $20,000 or 6.69% since 6th July 2011. Of the 30 stocks in my portfolio, 8 still have positive returns (twice as many as the Austock portfolio). My portfolio is beating the Austock portfolio by 2.16%, and also beating the ASX 200 index by 1%.

So far, this really makes a mockery of the Austock portfolio and the stocks in that portfolio. So much for holding so-called “blue chip” stocks.

I’ve attached a copy of the spreadsheet, so you can see for yourself the performance of the two portfolios.