We did post on Symphony in April taking a leap of faith by paying for growth and adding it to then our public portfolio. This is going to be a very short post as we examine how valuation changes in high growth companies

 

Flash back April 2014 – Symphony per share valuation on 2013 reported numbers

paying for growthOur logic to add Symphony to model porfolio was simple , Sustainable growth basis per share value was calculated at 843 as per 2013 reported numbers (Note Symphony reports June to June FY) which was well below market price that time giving us an adequate margin of safety if company kept growing

Now lets come back to Symphony per share valaution based on 2014 reported numbers

 

paying for growth

Now pay close attention to per share instrnic value a whopping 50+% increase in sustainable earnings per share value, followed by  a very close 47%+ increase in instrnic value per share on FCF basis

Market rewarded and recongnised it very fast in bull market this year

Learning

For fast growers always add sustaianble growth per share value as an additional item in your checklist before buying, you may find bargains when PE ratio will imply it is expensive

Caution

However a buy at current prices would not give any margin of safety to the investor, even if company repeats 2014, the 2015 Sustainable earnings growth per share value would be around INR 1905 which is roughly same as today’s market price

Hope this short post gives you a perspective to on how to value  fast growers

Happy Investing