MET - Metlifecare - one for the fundies?

[BlackPeter]

I'm struggling to see where this company is as good as an investment as RYM or Sum, especially at its current price. I've sliced and diced it many ways but have failed to come up with any reason to buy any over the other two. Due to the strong tailwinds in the sector it will do okay, but thats not enough reason for me to buy any with the other opportunities available.

Ticker	forward PE	average PE	CAGR
MET	6.1	25.7	11.7
SUM	11.7	29.8	29
RYM	16.8	28.8	23.8

note: PE based on real earnings (not underlying) and average typically the last 7 years (if available), same CAGR, forward PE based on "analyst consensus";

Looking at this table ... sure SUM and RYM are faster growing (higher CAGR) - but MET have the best PE of the three. I can see reasons to invest into them , but agree that probably all three will do well over the next couple of decades or so (unless the political conditions change).

Discl: hold MET (large parcel) and SUM (medium sized parcel);

[couta1]

I will concede that the NTA/share has always been more impressive than the others.

[OldGuy]

BlackPeter - your table is missing the most important column (PE/CAGR). IMHO, that is the best way to compare the three.

Using that metric, SUM outperforms the others quite markedly...

[Harvey Specter]

BlackPeter - your table is missing the most important column (PE/CAGR). IMHO, that is the best way to compare the three.

Using that metric, SUM outperforms the others quite markedly...

But can SUM maintain that CAGR. And can MET improve its - it has the most room for improvement one would think but it is a big beast.

[BlackPeter]

BlackPeter - your table is missing the most important column (PE/CAGR). IMHO, that is the best way to compare the three.

Using that metric, SUM outperforms the others quite markedly...

Most important? That's probably up to discussion, but agree that the PEG for SUM looks still slightly better than for MET (actually both have an amazing low PEG: MET 0.52 vs SUM 0.4 ... with 1 considered "fair" value and anything below is good). But than you need to solve Harvey's problem ... will SUM be able to maintain this CAGR and is it not likely that MET might speed it up?

Too hard for me, actually I like them both (well, at present ...). Great thing as well - I didn't had to choose - I own both of them

[OldGuy]

Most important? That's probably up to discussion, but agree that the PEG for SUM looks still slightly better than for MET (actually both have an amazing low PEG: MET 0.52 vs SUM 0.4 ... with 1 considered "fair" value and anything below is good). But than you need to solve Harvey's problem ... will SUM be able to maintain this CAGR and is it not likely that MET might speed it up?

Too hard for me, actually I like them both (well, at present ...). Great thing as well - I didn't had to choose - I own both of them

With the greatest of respect, the difference between 0.52 and 0.4 is actually quite significant. It means, for example, that SUM's price could increase to $5.70 and still be better value than MET according to this metric...

[BlackPeter]

With the greatest of respect, the difference between 0.52 and 0.4 is actually quite significant. It means, for example, that SUM's price could increase to $5.70 and still be better value than MET according to this metric...

Absolutely agree, if we assume that the rating of growth companies is an exact science. Unfortunately (or fortunately?) - as we all know - it is not, and if you have to live with the uncertainties of the share market, than I find that looking at orders of magnitude is often "good enough".

If I apply the Graham formula (which basically uses the same ratio), than a MET share would be worth $28 and a SUM share would be worth $18; Do I believe these numbers? Well, it probably depends, how long I wait ... but both numbers would be good enough for me to buy the stock around $5.35 (MET) or around $ 4.30 (SUM).

How do they say: "Prediction is very difficult, particular about the future" - that's one of the reasons I am happy to hold both .

[OldGuy]

Absolutely agree, if we assume that the rating of growth companies is an exact science. Unfortunately (or fortunately?) - as we all know - it is not, and if you have to live with the uncertainties of the share market, than I find that looking at orders of magnitude is often "good enough".

If I apply the Graham formula (which basically uses the same ratio), than a MET share would be worth $28 and a SUM share would be worth $18; Do I believe these numbers? Well, it probably depends, how long I wait ... but both numbers would be good enough for me to buy the stock around $5.35 (MET) or around $ 4.30 (SUM).

How do they say: "Prediction is very difficult, particular about the future" - that's one of the reasons I am happy to hold both .

how do you get $28 for MET with Graham's formula? I forget the details, but I know that Roger is quite enamoured with it...

[BlackPeter]

how do you get $28 for MET with Graham's formula? I forget the details, but I know that Roger is quite enamoured with it...

Ben Graham formula: Intrinsic Value = EPS * (8.5 + 2 * G);

with EPS = 88 cents (according to 4 traders, but credible, given that they had already 60 cents (incl. valuation gains) in the first 6 months).
and CAGR (i.e. G) = 11.7% (based on revenue growth from 2010 to 2018 (4 traders forecast); If you don't like to use the forecast for the CAGR, than it is 10% based on 2010 to 2015, resulting in an "intrinsic share value" of $25;

I think Roger uses (depending on the industry) different parameters ... and I don't think there is a right or wrong what you choose (as said before - no exact science ... probably no science at all). Anyway - whatever you do ... the intrinsic value appears to be (with all discussed retirement villages) ways above the current SP;

Obviously ... as with any other Retirement village provider ... if the property values stop climbing (or climb slower), than growth will be significantly lower ... i.e. anybody's guess is as good as mine, but should impact on all providers in a similar way;

Remember as well that Ben Graham said himself that these numbers are not real dollars ... just an indication of the "intrinsic value" (whatever this is).

DYOR;

[OldGuy]

Thanks for the clarification, BP. It looks like you are using NPAT, not underlying earnings, in your calcs. I would strongly advise against ever using NPAT in any kind of valuation formula for this sector (but I'm sure you already knew that)