Forums General Questions TIP Value Multiplier

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  • Byron Mirmikidis Newbie
    Post count: 1

    Hello Stig,

    Great Intrinsic value course and Buffett Accounting book. thanks!

    Under what circumstances would the TIPVM be less than PE, especially if the company has little to no debt?
    eg, I was reviewing EV/EBIT from Morningstar and for FONR, it has 6.66 PE (2018) vs 5.32 EV/EBIT (2018), and even at current date it is 7.13 vs 5.77 respectively. it seems counter intuitive to me considering all the other components that must be included. interestingly, FB and Apple have the same situation, but BRK.B EV/EBIT is greater than PE on all counts.

    Would appreciate your insight.

    Thanks
    Byron

    Veeral SVeeral S Aspiring VIP Member
    Post count: 59

    Hi Byron,

    Personally, I don’t pay too much attention to the various ratios you have mentioned in your query. There are lots of algorithms, traders, stock screeners, quants, etc are out there looking for small anomaly in EV/EBIT, PE, etc and then taking their position. As an individual investor, I don’t think there is any edge on investing against those players.

    Where, we, as an individual may have an edge, is using the fundamental way of investing, to come with a conservative intrinsic value of an asset and then buying that asset when the price is trading well below intrinsic value. Most of the ratios wouldn’t help to calculate that figure as a lot of valuation calculations comes from qualitative analysis.

    Let me know your thoughts.

    Regards

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