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Ade1234 - to me market cap/SP and intrinsic value are completely different things. Market cap is the current valuation determined by the market - intrinsic value is the value one assigns to the business based on how much money the business could generate in the future. The intrinsic value cannot be a precise figure as it depends on several far from certain assumptions, but it does give some foundation on which to base an investment decision. . If one thinks the sp is well below the intrinsic value then buy, if well above, sell. No timing of the market is necessary.

If you are 50/50 these are not good odds on which to invest.

Noone can advise and you shouldn’t listen to any advise but DYOR. For what it’s worth though, I recently placed a limit order for 275p well below any estimate I have made as to the intrinsic value ensuring a large margin of safety, but, given the volatility of this share, and the mad, mad world we live in currently, i think this order has some chance of being actioned in the next 6 months. If not, nothing is lost as far as I am concerned.

If anyone is interested in how to calculate the intrinsic value of a company using Discounted Cash Flow analysis, and apply the ‘margin of safety principle. I think this video would be a great introduction. . It is the only way I know of to estimate the ‘worth’ of a company and inform my investment decisions and works for me.

I attempted to value DT this way last year and came up with an intrinsic Value last year of 800-1000p at a 10% discount rate. I mentally applied a 50% margin of safety to this which should have meant I should have ever have paid more than 400-500p. I did pay a little more once bu still have managed a 330p average with my 3 purchases.

I think my estimates of future free cash flows were a tad overoptimistic , and interest rates have increased so I think a higher discount rate is in order when I recalculate. The valuation will come out lower.

https://www.youtube.com/watch?v=l-T-Vyk2txc

So now we understand why the NHS does not have enough funds! Mr Hunt……

‘Every company issue free or discounted shares to their directors and employees”

Too true. But is this necessarily in the interests of shareholders? The idea behind share options is to align the interests of management with the interests of shareholders. But according to Vanguard nearly all managers sell their shares immediately after exercising their share options. So how could the selling all of these shares for immediate profit possibly align their interests with the interests long-term shareholders?

I’m not convinced they can.

Roddw1 - in the short term you are right and market sentiment will be influenced, but the shares will eventually end up in the hands of employees, and what they then do with them, indeed, only time will tell.

Generous incentive schemes are great if they achieve what they are supposed to achieve, but, of not, they will reduce, or worse, destroy shareholder value. The jury is still out.

Bacchus - in answer to your question for one of the share issues (I suppose the rest were for the a similar reason - they are all reported in RNSs). Legacy matters, and hopefully not repeated for ongoing incentive obligations. Buying in shares to meet these obligations is a better and more transparent way IMHO.

“Darktrace announces the issue of shares to settle pre-IPO obligations to two members of the advisory council. Darktrace has issued and allotted an aggregate of 82,708 new ordinary shares of £0.01 each in Darktrace (the "New Shares"). An application has been made for the New Shares to be admitted to the Premium Listing Segment of the Official List of the Financial Conduct Authority and to trading on the Main Market of the London Stock Exchange.”

Roddw1. I don’t disagree with you for traditional buybacks, but this is not a traditional buyback.

In a traditional buyback companies buy back their own shares, and cancel them reducing the total number of shares in issue - so existing shareholders own a increased percentage of the company. In this case the Employee's Benefit Trust, run by independent trustees, is buying them. These shares are not cancelled but used to incentivise staff.; in reality it is just a transfer from one shareholder to another. So the existing SHs have no direct benefit except by that caused by a short term change in the supply/demand situation. This is a temporary effect.

Last year the company did buy back their own shares, but kept them in treasury, reducing the free float. These, again, are part of the incentive programme and none of the shares were cancelled. DT have done the opposite of buying back and and have been issuing shares. They have increased the number of shares by 4% since IPO, diluting the ownership percentage of ISHs who bought and held since IPO by the same amount .

Charles, I think it is a zero sum game at best. Yes, short term it will increase the number of shares wanting to be bought, and hence influence the supply demand balance, but it is a cost for the company as they will be giving the shares away to staff as freebies (incentives). If these incentives increase performance fine -although I have serious doubt - but otherwise these increased costs reduce the intrinsic value of the company and reduces the long term SP.

PG - perhaps the winds have not eased to a breeze but backed or veered to the quarter or tail to give a much more exciting sail!

I am not against well constructed incentive schemes but many behavioural and psychological studies show thy do not necessarily achieve as much as they are supposed to. Strange as it may seem, to be to some, money is not the main motivator for many people. Most people, in my opinion, want to do the best job they can.

A Harvard Business School Opinion.

https://hbr.org/1993/09/why-incentive-plans-cannot-work

Berylfu - don’t worry most PIs don’t understand the system of recording buys and sells. Buys and sells are not necessarily what they say.

Suffice it to say on any one day the number of shares sold will mostly closely match the number of shares bought, the difference being the usually small changes in the inventory held by the market makers. And trades are not always recorded on the day they are made.

For A trades the number of of shares sold always equals the number of shares bought. These transactions are recorded as a buy or a sell essentially based upon the supply\demand balance at the time of the transaction. So if recorded, for instance, as a sell it is actually a buy and a sell. Similarly if recorded as a buy.

For O trades through a market maker buys and sells are recorded separately so the total buy and sell volume recorded is actually twice that of A trades. And shares bought from the market maker can be recorded as a sell if the price is on the sell side of the bid -offer spread and visa versa. So a buy is not necessarily a transaction in which shares are bought and visa versa.

Confusing? You bet. The link below will explain it better.

https://www.proactiveinvestors.co.uk/companies/news/81/idiots-guide-to-the-london-stock-exchanges-setsmm-0379.html

Not much new - mainly commentary on currency headwinds.

https://www.thetimes.co.uk/article/falling-pound-hurts-darktrace-revenue-tzjmbvbjp

bobocaca - ‘87 was a bigger shock to me - stock indices falling 50% so so overnight or so it seemed. The general feeling was that we were in for a ‘29 depression. This is a relentless slow decline in a world that is showing increasing instability led by the authoritarian regimes. But these bad times will come to and end sometime - always have, always will.

Some of the old world shares are of course still doing well - like the sin stocks BATS, IMB and the likes of PEP.- and the FTSE100 is actually holing up quite well all things considered.

‘Do not believe people say if you keep the shares long enough, you will surely be making money. Marks and Spencer is down 44% after 30 odd years‘

Not all shares - only those very few shares have the right fundamentals for long term investment = especially the ability sustain long term competitive advantage. And then if the fundamentals change negatively, it would be time to get out. M&S is a case in point. It had everything going for it until the early 90’s when it lost it way and the competitive environment changed - and it has been a dog ever since. From my point of view, it is just not investable. I take the same view regarding banks. Companies like Visa. Mastercard, Microsoft still have the right fundamentals in my opinion, and so still does Halma which I have held for 30 yrs (a30 bagger) but that too might change. I took the view that DT would fit that mould because of its technology, and the future leverage of that technology in other areas, but the jury is still out.

We all need, too, all the luck we can muster.

Oldgold 22. I was not implying that DT would or could grow at 120% but was hoping a 40% growth rate could be maintained for a few years and that the 25% EBIT margin - that DT recently re-iterated - could become reality in the foreseeable future. So if, and only if, this can be achieved do I believe 600 plus is now on the cards. Actually my optimism is being sorely tempered at the moment, but I’m still giving DT the benefit of my doubt, so I remain invested.

But Getafgrip’s questions are totally relevant., and worth careful consideration

On the financials there are also aspects that I don’t like. For instance to me commission costs are a current expense. But DT is capitalising some of them so they become an asset on the balance sheet raising the current profit figure and equity. This is apparently allowable, but this was a trick WorldCom used - fraudulently - to fool the punters and then went belly up even though the profits were supposedly fantastic. To be fair R&D expenses are capitalised in this manner but, to my mind, there is a clearer link of R&D expenditure to future business possibilities so can be seen as an investment.

I agree 600 seems to me a reasonable valuation with current numbers and projections. But we will need a more sustained and higher growth rate to justify higher numbers at lest for a few years.

Just to illustrate the importance of high growth on any valuation- and I am not saying it will happen like this - look at what £ 100 will turn into in five years time at the current 33%, 65% and 120% growth rates of DT, Crowdstrike and Sentinelone,

At 33% growth £100 grows to £416 in five years

At 65% £1222

And at 120% £5154.

The question I have is why are we not growing revenue faster - 30-33% growth is down from from 44.5% last year and now half that of Crowdstrike and a quarter that of SentinelOne who have now had six consecutive quarters with revenue growth over 100%. I know the reasoning DT gives but…….. Perhaps Mr Market is asking the same question.

Yes - rules 1&2 a key mantra - learn’t from Graham by his own admission. The concept is covered in Graham’s chapter 8 and 20 of the Intelligent Investor. As SW77 hints at, these two chapters cover the very essence of sound investing and, in my opinion, are as relevant today as they ever were. Buffett build his own philosophy on these foundations but added further great insights.

SW77 - I agree with your assessment of the situation -scary place this world of ours at the moment. I too have been investing since I was in school and spent a chunk of my career in evaluating the technical and financial viability of oil and mineral/metal projects. For that reason I prefer putting numbers to things so that I understand in detail how a business is to make money and where the strengths and frailties lie. I won’t invest in a company if don’t understand the “financials”. On this score DT is in good shape and this should allow some underpinning of the SP.

Investing for me has been a long learning curve but I am convinced a long term approach is the best way for me and I remain a disciple of the “fossils” Buffett/Graham (father of value investing)/Fischer (father of growth investing). It is not a get rich quickly way of investing but it works.

Well bobocaca - just as Mr Market may be (and I mean maybe) currently valuing DT on the low side , Mr Market may be valuing SentinelOne on the high side. SentinelOne is well behind on the journey to making money, but, when I last looked, It’s revenue was growing 2.5X faster (a rate of 120% if I recall correctly). So valuation all depends on how Mr Market sees the future evolving IMHO. A company with revenue growing at 120% will soon outstrip one growing at 45% , all other factors being equal.