We examine first the 5 most important company data of any company. Publications of these data are obligatory several times a year.
We will deal in depth with the return on invested capital (ROIC), the earnings per share (EPS), Sales, the cash flow and the book value per share (BVPS), last representing approximately the simplified liquidation value of the company.
We calculate for each of the 5 mentioned company data their growth rates over the past 10, 5, 3 and the final last year and we will basically only accept a minimum growth rate of 10% for each specified time period.
With the aid of the past P/E ratio (price earnings ratio), the future P/E ratio, the growth of the past and future earnings per share we calculate the future stock price of the companies share for the next 5 and 10 years, which can be expected because of the public released company data.
This is compared with the current stock price traded on the markets; taking into account the margin of safety (MOS), which is usually 50%. Therefore, we call it the ‘Margin of Safety Price’ (MOS Price).
Then, if the current traded price on the markets is cheaper than the MOS Price (Margin of Safety Price), a buy recommendation arises in each case on the next 5 and / or 10 years.
Finally, we consider, of course, the debt of each company, which must be melted off in the near future by the current cash flow.