Monday, November 07, 2016

Basic Fit intrinsic value ? Discounted Cash Flow ?

Basic Fit is a recent IPO, they are opening gyms hand over fist. The stock price has gone from 17,50 down to 12,60 and back up to 16,45.

It's adjusted EPS (which seem to be EBITDA per share?) = 0,11 per share in first half of 2016. Say full year adjusted earnings are 0,25 per share, then Basic Fit is trading today for a Earnings Yield (inverse PE) of 0,25 Earnings divided by 16,45 share price = 1,5%

Say "profit" doubles and you are willing to pay 15x profit then you get 0,25 x 2 = 0,50 x 15 = 7,50 Euros. Anything more than this seems (to me) ridiculously expensive.

Will be interesting to follow during the coming years, but not an investment for the Defensive Investor today at a Market Cap of 900m Euros and Enterprise Value of more than a billion and annual sales of less than 300m Euros...

Beware of EBITDA, as Charlie Munger says, when you see "EBITDA" think "BullSh*t".

I’ll leave it to Warren Buffett to explain:
“People who use EBITDA are either trying to con you or they’re conning themselves. Telecoms, for example, spend every dime that’s coming in. Interest and taxes are real costs.”

As far as Discounted Cash Flow is concerned, if there is no CF there is no DCF.

Conclusion: Growing revenue quickly, but stock seems expensive. Not a stock for the Defensive Investor.

See for quality profitable companies.

Comments, questions or E-mails welcome:

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