In addition, deleveraging reduces the risk level and should lead to
increased valuation multiples.
Now consider the growth stock: It actually ends up delivering a consistent 15 % annual gain in revenue & earnings — based on that performance, your fair value estimate rises accordingly & we can be pretty confident the market's happy to maintain or
increase its valuation multiple.
Not exact matches
Valuation multiples tend to
increase when confidence in corporate earnings certainty and growth
increases.
We've also seen the P / E
valuation multiple slowly start to
increase for the S&P 500 as well.
The company's strengths can be seen in
multiple areas, such as its notable return on equity, attractive
valuation levels, expanding profit margins, good cash flow from operations and
increase in stock price during the past year.
With low
valuations, investors have enjoyed the prospect for high expected returns even if
valuations contracted further, and also faced a high probability that a future
increase in P / E
multiples would add further to their returns.
Then again, my
valuation's a year old now: So applying the same methodology (as last year's write - up), Applegreen's underlying (i.e. maintenance) free cash flow has
increased spectacularly — from $ 35 million to $ 62 million (see p. 80)-- and yes, I still believe it's worth the same 20.0 P / FCF Fair Value
multiple.