So it's not a bargain, it's paying more in dividends than it is generating in cash, so probably that's the reason why it's debt are growing. But considering that it is a growth company, part of this investment would be to increase revenue.
Looking for this information in the last release, we see that "of the total investments in the quarter, 69.5% was allocated to business growth". If that's the truth, than the FCF would be considerably high! If we allow that half of the investment was maintanance and half was allocated to business growth, than the FCF would grow to 115 millions and yield to 7,85%. Even so, it's not so high for me to buy these shares now.
FCF: 115 millions (7,85% Mkt Value)
P/E: 13.5
ROE: 26%
4 comments:
Actually the dividends are being paid with debt. But CTAX4 has been investing a huge amount of cash in its operations with a good ROE. Since I bought CTAX4, it soared 121% and we are talking about buying more. That's the kind of company Buffett and Fisher likes. The problem is that's hard to value a company like this.
There's a problem with your numbers. The net income in 2008 was 92,409 millions BRL.
Sorry, I have just copied from DFP, I really don't know how it was divided by 10.
Anyway, the figures corrected are:
FCF: 4.2%
FCF considering that 50% of investment is to make the business grow: 9.75%
Well, now it's more interesting. I'll take a closer look to see if we can really consider a FCF of about 10%, and growing.
I think it's possible that the amount used to make the business grow x amount used to keep the business going is irrelevant. The important, maybe, is the amount created by the company that is not used to keep going nor grow and could be paid to the me. The amount used to grow de company is important to decide wich growth rate to use in the calculations.
When the ROE is high, and the investiment is high too, the valuations can get insane quickly.
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