Originally Posted by
BlackPeter
Interesting to see how the markets perception of "the right" PE is changing. Its not that long ago that the market thought a PE of 15.8 is highly appropriate for TRA (24 cents EPS in FY2017 - SP $3.80). Today Mr Market thinks that a PE of 8.3 is just right (29 cts EPS in FY2018 at $2.40). And - as we all know, Mr. Market is always right and always will be. However - Mr Market likes to change his mind without notice and sometimes he is euphoric and sometimes gloomy.
I think your (beagle's) view is absolutely legitimate - and sure, if TRA's strategy doesn't work out and they always stay a boring old used car dealer without any noticable additional income from insurance, finance, maintenance, end-of-life business and property development than, yes - longterm an average PE of around 10 might be quite appropriate. But isn't their income from all these other "branches" growing?
So - assuming for a moment their strategy does work out and their market share and margin is growing - than maybe the downside risks at the current share price are lower than the potential upside rewards ...
Unless we think TRA will be biting the dust or continuously shrink ... market is normally cycling between euphoria and gloom ... and given that we are currently in gloom mode - what would be next? More gloom?