When a stock is trading around 15-20x sales - ask why would an accident not happen? What could be the valuations damage in that case?

@harindersnanda @ishmohit1 @soicfinance @punitbansal14 @nison_steve Both should do well. Prefer Zoetis for leadership, best in class margins and management's execution. Elanco should improve with Bayer Animal boosting companion proportion in its overall mix.

#SeQuent will under-perform next 1-2 years due to #ESOP (unless a surprise M&A happens)

@Jeevan_rjv @soicfinance @itsTarH No. Not those ones. Editas, Intellia etc are more on the CRISPR patents and royalty play.

"The global natural cosmetics market is expected to be worth $48.04 billion by 2025..... #Biotechnology could be the game-changer for natural beauty lovers – and, more crucially, Planet Earth."

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#Fermentation | Industry 5.0 Vision 2 🧬

@soicfinance @ishmohit1 Learning and taking inspiration from you sir..🙏🏼🙏🏼

In @HowardMarksBook's memo early this year, one key thing I realized is how wrong I was to dismiss some businesses because I thought they were overvalued simply after looking at the P/E, P/S ratio etc.

You can't determine a business is overvalued without knowing the in-depth qualitative fundamentals of the business, because otherwise where is your edge? Anyone in the world can simply look at a company's P/E ratio.

I know this seems obvious, but so many people on fintwit are very guilty of this - myself included.

Unless I really know and understand a business, even if it has a seemingly absurd P/E or P/S ratio, I will refrain from concluding it is overvalued. It's just lazy and wrong.

The weird thing about this is that when I'm normally researching a business, I totally understand this about valuation and do in-depth research and determine if it's undervalued. But then I'm quickly dismissive of a tech company that trades at 50x earnings and say it's overvalued

@patrick_oshag A DCF doesn't require use of a spreadsheet. It also doesn't require complex assumptions.

Buffett does the DCF in his head. A unit economics analysis is a DCF done bottoms up . LTV/CBCV can also be calculated in someone's head or roughly "eyeballed" based on pattern recognition.

1/ Howard Marks once said that before buying an asset, above anything, he wants to know “the amount of optimism that’s in the price.”

All investors can do this with a handy tool: The Reverse DCF.

I'll also leave a download link to my compact DCF Model at the end of this thread.

2/ We all know a regular DCF. But's what a "Reverse DCF"?

If we consider that a DCF is a Linear Equation, we could say the 'X' (The unknown variable) is the Intrinsic Value.

In a Reverse DCF, we start with the Market Price and try to find some other variable, say Sales Growth.

3/ Let's start by taking an example: VST Industries, a Cigarette-maker based in India.

I valued them on my blog a while ago. I'll be retaining the old assumptions, but using the latest financials.

So please note that the Valuation isn't accurate

4/ This is a "Regular DCF" of VST Industries. The Assumptions I've made indicate an Overvaluation.

The Intrinsic Value is Rs. 3,012, but the Market Price is Rs. 3,492.

Let's not dwell on whether this is correct, since we discussed earlier that this isn't an accurate Valuation.

5/ If we want to do a "Reverse DCF" instead, we need to pick a different variable to 'find'. Say, I will pick the Sales Growth numbers.

I will now remove the Sales Growth numbers from the Model and assume that Sales Growth is the same across the years for ease of calculation.

It’s perfectly possible for a company to generate rising EPS at the same time it is employing increasing amounts of capital at falling & inadequate rates of return

In laymen’s terms, a company can be busy destroying shareholder value even as it increases earnings

Terry Smith