Fosrich Company Limited | Equity Analysis

Valuation

To arrive at our price target for Fosrich, we utilized a weighted approach using a justified price-to-earnings (P/E) model as well as an approach in which a fair price is derived from a target forward Price/Earnings-to-Growth ratio. Our estimate for the 2022 Financial year-end eps, considering the growth in the first half of 2022 earnings and our expectations for the performance for the rest of the year, amounted to $0.11. To arrive at a discount rate, we utilized the capital asset pricing model, which gave us an outturn of 17.93%. Our expectation for the long-term growth rate came in at 13.67%, taking into consideration, factors including the company’s profit margin, leverage and asset utilization. While this may seem high on the surface, it is reflective of expectations of substantial front-loaded growth in the coming years. This resulted in a justified P/E ratio of 23.51x, giving us a value of $2.58; additionally, using projected 2022 earnings, the average 5-year earnings growth rate was calculated at 43.52% for the company. Given a target PEG ratio of 1.00x, we derived a fair price using projected 2022 earnings of $4.77. A simple average of these two methods gives us a target price of $3.67, representing an 8.98% downside from the last closing price of $4.00. The company currently trades at a trailing P/E multiple of 52.49x, more than double the junior market average of ~22.13x. However, based on its current trading price along with our expected EPS the forward P/E is estimated at 36.50x. With consideration to the expected return along with other factors stated above, we recommend investors MARKETWEIGHT FOSRICH

Stock FOSRICH
52 Week High J$5.12
52 Week Low J$0.80
YTD Return 441.99%
Dividend Yield 1.10%
Target Price J$3.67
YTD Return 0.21%
Potential Return -8.18%
52 Week Low J$25.00
Trailing P/E 52.49x
Trailing P/B 12.02x
Forward P/E 36.50x
Total Return -8.18%
Recommendation MARKETWEIGHT

As at September 5, 2022

Market News Signup

Signup to get updates to your inbox
  • This field is for validation purposes and should be left unchanged.

Keep Reading...

Let's Make Your Money Work For You