With a thorough knowledge of renovations and their costs, Isaiah can also give his clients a realistic idea of what potential renovations would cost and what
kind of value upside it can provide the home.
Not exact matches
In somewhat similar vein, you can obviously equate earnings yield to RoME, but that would perhaps miss the point — with an analysis, how you get there is often just as important as the end - result... If you re-read that section
of my post, the important point is to force myself (or readers) to stop focusing on book
value, or intrinsic
value, or even the potential
upside — and to re-focus more specifically on what
kind of return may be on offer, based on the current market cap & ignoring any revaluation potential.
Now, usually I wouldn't consider these appropriate for my «
value» portfolio as the
upside potential is generally in the single to low double digits percentage-wise, mostly from a narrowing
of the discount, plus there needs to be some
kind of catalyst to make the discount disappear.
So this
kind of upside, or
value realization, may never happen... But I don't believe this presents as big a risk as you might think — it amazes me how many companies have none
of this potential
upside priced in!
Not an incorrect analysis, necessarily, but that
kind of upside presumes management's at least willing to consider unlocking (and / or increasing) the company's intrinsic
value.
That
kind of turns our American
values upside - down.