RE: Strictly16 Nov 2017 11:36
You aren’t calculating EPS which is a fully audited figure and factual, your methodology is highly floored for a number of reasons. The reason for the difference in book value growth from one period to the next that you highlight (after considering EPS and cash payment through dividend) can be found by simply looking at the OCI line in the financial statements. In this instance it is almost entirely explained through a large actuarial loss in the defined pensions scheme under IAS 19, which is out outside the companies control and down to actuarial calculations. This has no bearing on the financial performance of the underlying business and is thus excluded from EPS calculation by definition, and rightly so, which is why you have been unable to tie the EPS less dividend into the book value growth. Furthermore, ROCE is a superior metric to ROE as it considers the different financing structures of an entity where as comparison of ROE does not, so it is a very poor comparative compared to ROCE. CRST ROCE is c 200-400bps higher than both BWY and RDW indicating a more efficient use of assets to generate returns.
On an EPS and yield basis, CRST is far better value than TEF at current levels, and better value than BWY and RDW. Part of the differential is explained through the risk future earnings are likely to come under as evaluated by the market. At current levels the market understandably has some concerns over CRST London/southern focus compared to more widely diversified builders. The choice as an investor then comes down to risk reward preferences, the higher the risk the higher the potential reward. I hold all three of RDW, CRST and TEF and adjust weigthings in line with financial valuations; yesterday this swung heavily in CRST’s favour as it hit 470p, at a current level of 510p the anomaly has now narrowed significantly- as one would expect in an efficient market.
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