Analyzing FRAS4 2010 results it's easy to perceive a strange increase of BRL 63 mi in shareholders' equity. Looking for explanations in notes to the financial statements we see that that increase was due to a revaluation of assets amounting to BRL 93 mi (63 mi after taxes) demanded by IFRS.
As a result, ROE decreased from above 20% to below 15%. Also, net income decreased because depreciation has gone up. So we have a double impact on ROE: a decrease in net income and an increase in shareholders' equity.
My question: what is the right way to analyse FRAS4 figures? Before or after IFRS impact? Or, put in another words, should we consider the eficiency of a company based on what was originaly invested or for what it's worthing now?
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2 comments:
First and the most important: FRASLE's release did't try to make we look to the brighter side. It just said that there was a negative effect from the revaluation of assets. They didn't even say how much was the effect. They also didn't try to show any "adjusted" results or metrics.
This is bad for the analysis, but tells me the management is not using shenanigans to increase the earnings or the metrics.
Since a long time ago I've been valuing stocks using the free cash flow. Except for banks, of course.
I bought a little more of FRAS4 today at 3.35.
At this price, either current P/E and medians P/E of 3 and 5 years are closer to 8.0 or less.
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