Franchise P/E where

lunarfollies

Is Franchise P/E:

Observed - Base P/E

where
(Base P/E = 1/r)

or

FF * G

where
FF = (ROE - r)/(ROE * r)
G = g/(r-g)

brainsX

no, G is the Growth component and FF is the franchise component

b_sea93

I always use FF*G

FF = (1/r)-(1/roe)
G = g/(r-g)

5566

Oh my god....there are two components....FF*G is the growth component !

FinancialAnaly

so, in the stalla book it first says
Franchise PE = Observed - Base
then gives the other formula.

is the first one just wrong or am i missing something?

SFoyil

they are not the same. 2nd formula uses only fundamentals. 1st uses market price. what if the shares were way over valued and Observed P/E is 10000000000

tikfed

Sorry - I meant to say

Justified P/E - Base P/E.

Justified = (1-b)/(r-g)

Base = (1/r)

Remaining = FF*G = (1/r - 1/ROE) * (g/(r-g))

CP

SpyAli

both are the same.... (or should work out the same)

two ways to bell the same cat.

CP