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added info on sustainable growth rate

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ronny abraham 2025-01-23 02:55:15 +02:00
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_data/market share spreadsheet.numbers
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_share/media/sass/business.sass
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@use "sass:map" @use "sass:map"
@use "sass:color" @use "sass:color"
@use 'org-media-sass/default-org-mode' @use 'org-media-sass/org-base'
@use 'org-media-sass/themes/sienna-elegance' as * @use 'org-media-sass/themes/sienna-elegance' as *
@use 'org-media-sass/fonts' as fonts @use 'org-media-sass/fonts' as fonts

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_share/media/sass/org-media-sass

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Subproject commit 1a79c3af079f4c2d823cd41f4157a712b98c1d31 Subproject commit d6243a4b2f2cb70e530857a4b1452c91a003b60d

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mba/ch50.org
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#+title: Section 9 | Lesson 50 - How to Value Private Companies and Growth Methods #+title: Section 9 | Lesson 50 - How to Value Private Companies and Growth Methods
#+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/business.css" /> #+HTML_HEAD: <link rel="stylesheet" type="text/css" href="../_share/media/css/org-media-sass/categories/business.css" />
* Links * Links
- [[./../mba-main.org][TOC | Business]] - [[./../mba-main.org][TOC | Business]]
@ -195,3 +195,78 @@ assuming the IPO takes place in 2020 our valuation will be
|------------------+--------------+----------------------------------------| |------------------+--------------+----------------------------------------|
| Growth Investors | Revenue x 10 | *₪13,994,400,000* | | Growth Investors | Revenue x 10 | *₪13,994,400,000* |
| Value Investors | EBIT x 10 | *₪6,577,368,000* | | Value Investors | EBIT x 10 | *₪6,577,368,000* |
** sustainabile growth
*** how it works
- sustainable growth is the maximum growth rate a company can achieve without additional equity or debt financing
\[
\text{Sustainable Growth} = \frac{ \text{ending equity} - \text{beginning equity} }{\text{beginning equity}}
\]
- you want to grow BELOW the sustainable growth rate so as to not require outside help
*** basic example
| sustainability growth example | |
|-------------------------------+------------------|
| beginning equity | $ 351,597,690 |
| ending equity | $ 860,108,490 |
| sustainable growth rate | 145% |
| 2020 growth rate | 98% |
- not sure where he got the values for beg and ending equity. assuming it's from somewhere else because it doesn't actual match up
- the values for growth rate probably come from EBIT or operational revenue, and if calculated using the growth rate formula, come out to 94% not 98%
*** More extensive Example where dividend are 0
| Column Name | Value | Formula / Notes |
|---------------------------+----------------+-------------------------------------------------------|
| Year | 2020 | |
| Revenue | ₪1,399,440,000 | |
| COGS (Cost of Goods Sold) | ₪279,888,000 | |
| Gross Profit | ₪1,119,552,000 | Revenue - COGS (Cost of Goods Sold) |
| Operating Expenses Total | ₪461,815,200 | |
| Operating Profit (EBIT) | ₪657,736,800 | |
| Interest | ₪85,000 | Given |
| Tax | ₪159,764,269 | Assuming tax rate of 24.29% |
| Net Income | ₪497,887,531 | Operating Profit - Interest - Tax |
| Beginning Equity | ₪699,720,000 | |
| Ending Equity | ₪1,197,607,531 | Beginning Equity + Net Income |
| Average Equity | ₪948,663,765.5 | (Beginning Equity + Ending Equity) / 2 |
| Dividend Payout Ratio | 0.00 | |
| ROE (Return on Equity) | 52.48% | Net Income / Average Equity |
| Sustainable Growth Rate | 52.48% | ROE * (1 - Dividend Payout Ratio) |
| Actual Growth Rate | 71.16% | (Ending Equity - Beginning Equity) / Beginning Equity |
- here beginning equity was based on 2019 Gross Profit
- different beginning equity values lead to VASTLY different results
- NOTE: you can see that the Sustainable Growth Rate, is very far bellow the Actual Growth Rate with 52.48% to 71.16%
*** example where a dividend payout of 44% was expected
| Column Name | Value | Formula |
|---------------------------+----------------+-------------------------------------------------------|
| Year | 2020 | |
| Revenue | ₪1,399,440,000 | |
| COGS (Cost of Goods Sold) | ₪279,888,000 | |
| Gross Profit | ₪1,119,552,000 | Revenue - COGS (Cost of Goods Sold) |
| Operating Expenses Total | ₪461,815,200 | |
| Operating Profit (EBIT) | ₪657,736,800 | |
| Interest | ₪85,000 | Given |
| Tax | ₪159,764,269 | Assuming tax rate of 24.29% |
| Net Income | ₪497,887,531 | Operating Profit - Interest - Tax |
| Beginning Equity | ₪699,720,000 | |
| Ending Equity | ₪1,197,607,531 | Beginning Equity + Net Income |
| Average Equity | ₪948,663,765.5 | (Beginning Equity + Ending Equity) / 2 |
| Dividend Payout Ratio | 0.40 | |
| ROE (Return on Equity) | 52.48% | Net Income / Average Equity |
| Sustainable Growth Rate | 31.49% | ROE * (1 - Dividend Payout Ratio) |
| Actual Growth Rate | 71.16% | (Ending Equity - Beginning Equity) / Beginning Equity |
- note the Sustainable Growth rate is worse at 31.49%
- incidentally if I try to change the Beginning Equity to a different metric, ie such as revenue which is around 999m, the SGR becomes EVEN WORSE
*** retained earnings
- part of equity
- how much profit derived over the years