RE: Earnings to Equity17 Jan 2021 15:00
Hi Strictly Bricks/Vlad,
Have read your recent comments in this BWY section with a great deal of interest.
I have recently operated a very similiar methodology as what each of you have described as to how you value companies, but with a small difference as I understand it. I look at the change in "Net Tangible Asset Val Per share" each year, and add this to the dividend paid out each year, for a total tangible return to the shareholder each year, and then compare different companies over a 4-5 year period on this basis.
Benefits - I like this as I can compare my returns to the stated EPS for each company over the period, and I can thus find large irregularities. But it does leave me exposed to errors in stated EPS/Tangible asset value per year, or where the number of issued shares is moving round. I understand you more calculate on the company profit/dividend figures and market cap rather than the per share figures?
Like you, on my calculations BWY and RDW appear the standout candidates in this sector.
But my calculation has thrown up one strange outcome I have not looked further into yet - In the 2020 year BWY reported an EPS figure of 156.1, a large reduction due to the pandemic (fair enough)!
But in addition to a dividend paid out of 100, Tangible Asset value per share increased by a whopping 276p per share, meaning circa 220p of value was created from somewhere, yet taxation did not increase.
Any idea where this figure came from, have you looked at this previously?
If part of the landbank was re-valued (I am assuming the most likely reason), would not some tax have been payable?
Intersted in your thoughts, and I might also ask for a blog invire one day!
Cheers!