Also, with fast improving sentiment & even some economic momentum, there's an opportunity to selectively look back & incorporate prior
peak operating margins / earnings as a component of some valuations.
Again, we'll split the difference between FCF &
peak operating margins — which suggests a 1.5 P / S multiple is still appropriate, with no adjustments necessary for cash / debt (net debt's actually $ 2.7 million):
Meanwhile, it's reasonable to price KSP somewhere between its prospective 5.4 % & its historic 13.3 %
peak operating margin, which would equate to something like a 0.75 Price / Sales ratio.
And I'm also aware of the huge margin potential here — CPL previously enjoyed
a peak operating margin of 9.5 %.
Not exact matches
Operating free cashflow
margin turned positive again in the last 12 months, at 2.7 % — and actually jumped to 15.3 % (similar to average
peak margins) in their most recent interims.
This is also a pro-forma FY - 2018 — but it remains subject to AUME / fee / FX rate changes, etc. — this estimate's critical, as we see the full impact of the new AUME
peak & sterling's post-Brexit vote collapse flow through... not only in terms of revenue, but a radically higher incremental
operating margin.
Fortunately, at this point, it's priced for (permanent) recession... trading for 0.6 times book, 0.7 times (
peak) turnover (noting adjusted
operating margin also
peaked then, at 39 %), and 2.5 times (
peak) earnings.
stock, and I'm reasonably confident it will revert to their
peak / average
Operating Profit
Margins, I'll actually price it at a P / S Ratio that reflects an average of current and
peak (or LT average)
Margins.
Adjusted
operating margin in FY - 2015 was 17.8 %, well above the previous
peak of 14 % back in 2007 — that deserves a 1.75 Price / Sales ratio, based on Last Twelve Months (LTM) revenue of $ 327 million (as of end - April).
However, Google revenues exhibit a seasonal pattern, rising each quarter to reach a Q4
peak at 29 % of annual revenue (I see no
operating margin seasonality).