If the conclusion about the stock price resulting from your evaluation does not match the market price, it most often means that you missed something, something the market thinks differently about… Of course, it is not impossible that the market is wrong, but this happens rarely…

In such cases, I take the most significant factors and perform a compromise analysis to reach the market expectations. For example, what does the market think about sales growth? Margins? ROIC? By mixing these parameters, how do we reach the market price?

Iso-curves show the trade-off combinations of factors that lead to the same outcomes…

Example:

Let’s consider a real-world scenario to make this concept more tangible for professionals:

Imagine you’re evaluating a tech company’s stock, and your analysis concludes that its fair value should be $150 per share, while the current market price is $180. The $30 discrepancy suggests that the market is factoring in something you might have overlooked.

To resolve this, you would start by analyzing the most impactful variables. You might examine the market’s assumptions on the company’s sales growth. Is the market expecting a 20% annual growth while you have only factored in 10%? Next, you would look at the profit margins. Are you projecting lower margins due to rising costs, while the market expects them to remain stable? Finally, consider the Return on Invested Capital (ROIC). Is the market optimistic about the company’s efficiency in using its capital compared to your conservative estimates?

By adjusting these variables and analyzing their combinations, you can create iso-curves that represent different scenarios where the stock price aligns with the market’s valuation. These curves help visualize how changes in growth rates, margins, and ROIC can collectively justify the market price. Through this iterative process, you align your analysis closer to market expectations, identifying whether the market is indeed overly optimistic or if your initial assessment missed some critical factors.

This method ensures a thorough understanding and helps bridge the gap between your evaluation and the market’s perspective, reducing the chances of significant oversight.

#VALUATION – Measuring and Managing the Value of Companies, 7th Edition
McKinsey & Company,
Tim Koller, Marc Goedhart, David Wessels

იზო-მრუდების ანალიზი:

თუ შეფასების შედეგად გაკეთებული დასკვნა აქციის ფასის შესახებ არ ემთხვევა საბაზრო ფასს, ეს ყველაზე ხშირად ნიშნავს იმას რომ რაღაც გამოგჩა მხედველობიდან, რაღაც რაზეც ბაზარი სხვაგვარად ფიქრობს… რა თქმა უნდა გამორიცხული არ არის რომ ბაზარი ცდებოდეს, მაგრამ ეს ხშირად არ ხდება…

მე ამ დროს ვიღებ ყველაზე გამვლენიან ფაქტორებს და ვაკეთებ მათ კომპრომისულ ანალიზს იმ მიზნით რომ მივიდე ბაზრის მოლოდინებამდე. მაგალითად, რას ფიქრობს ბაზარი გაყდვების ზრდაზე? მარჟებზე? ROIC-ზე, ამ პარამეტრების როგორი შეთავსებით მივდივართ საბაზრო ფასამდე?

იზო-მრუდები აჩვენებენ ფაქტორების ურთიერთ-კომპრომისულ კომბინაციას, რომელებსაც ერთიდაიგივე შედეგებზე გავყავართ…