Valuation & Recommendation
To arrive at a price target for SVL, we utilized a justified price-to-earnings model with our estimated forward earnings for the company as well as a relative P/E valuation approach with respect to its own historical P/E. Our estimate of the EPS for the 2024 Financial year-end amounted to $1.30. To arrive at a discount rate, we utilized the capital asset pricing model, arriving at a discount rate of 13.53%. We calculated the Company’s long-term growth rate based on its return on equity and earnings retention ratio, arriving at an outturn of 9.06%, while this may appear high, over the last 5 years, the average growth in net income amounted to 11%, suggesting that the firm has justified this outturn. Using these inputs, we derived a justified P/E ratio of 22.39x, giving us a price target of $29.56. When compared to its average P/E over the past 3 years of 23.65x; applying this multiple to our forward EPS projection resulted in a target price of $30.01. When averaged with the justified P/E result, our final price target amounted to $29.56. The Company currently trades at a multiple of 22.00x and with our forecasted EPS output for FY 2024, the Company trades at a forward P/E of 20.01x. Considering the expected return along with other factors stated above, we recommend investors OVERWEIGHT SVL in their portfolios, with up to a 10.0% allocation.
| Stock | SVL |
|---|---|
| Last Closing Price | J$26.01 |
| 52 Week High | J$31.00 |
| 52 Week Low | J$20.00 |
| YTD Return | -13.10% |
| Target Price | J$29.56 |
| Potential Return | 13.64% |
| Trailing P/E | 22.00X |
| Trailing P/B | 2.01X |
| Forward P/E | 20.01X |
| Dividend Yield (TTM) | 3.48% |
| Total Projected Return | 17.12% |
| Recommendation | OVERWEIGHT |
Supreme Ventures Limited | Equity Analysis
