RE:Book Value Ouch! Givemeabreak1,
“Solidifies my
feeling that AC is fully valued!”
Your comment brought back fond memories of Albert Brooks’ song from the '70s. It used to be fun watching the female university students break out in tears whenever this song was played at the weekend pub crawl.
Be careful about your feelings though when it comes to investing.
An informed poster on the Board told us a few months ago that the proper valuation model for capital intensive industries is enterprise value to invested capital, not price to book. He/she also said that historically, there is a one-to-one relationship between return on capital and the EV/IC multiple. A return on capital of 20 percent will get you a 2 multiple.
The analyst at my bank is forecasting a 22 percent return on invested capital in 2023 and net debt = $4.8 billion. If invested capital is $14 billion, then the enterprise value i get is 2.2 x $14 billion = $30.8 billion! Subtract the net debt and divide by number of shares ($26 billion/360 million) and I get $72 dollars at the of 2023. Discount back to the end of this year at 9 percent and I get $61/share. This gives me that 'warm' feeling your looking for, but only after the analytics.
Cheers!
Allbeef
By the way, here is the link to the song, ENJOY!
https://www.youtube.com/watch?v=-iW0FVLd-3M