A2M 2.50% $10.65 the a2 milk company limited

Originally posted by asb83Good to see someone with a more...

  1. 351 Posts.
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    I would agree that PE of 30 is high, I hold an private wholesale investment with PE of 1.5 and comparatively speaking A2M seems ridiculous.

    However my private business does not have a earning growth of 100% a year, this made the PE of 30 very cheap.

    Peter Lynch used to buy stock with a 25% YoY EPS growth at approx PE<25. His theory is that a PE 25 company with consistent 25% YoY growth would mean the PE after your Year 0 purchase would be:

    Y0: 25

    Y1: 20

    Y2: 16

    Y3: 12.8

    Y4: 10.24

    Y5: 8.192

    Y6: 6.533


    A2M if EPS growth is maintained at 50% (Assuming half of the FY17/18 growth at 106%) 

    FY19: 30

    FY20: 20

    FY21: 13.33

    FY22: 8.88

    FY23: 5.93


    Earning growth if consistently delivered, will drive drastic reduction in PE. It'd be a bit late to buy into growth stock that had reached the behemoth size which growth is restrained by MC, like Nestle and Danone. Late comer will see themselve stuck with a High PE stock that has single digit earning growth. The only benefit those companies offers are stability and above inflation rate dividend at the company's discretion. 


 
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