We will follow Phil Town’s Rule #1 investing methodology:
Make sure the company has meaning (does good things), a moat (sustainable competitive advantage), great management, and a big margin of safety.
Calculate the future stock price based on the equity growth rate and predicted PE ratio, then discount it back using a required rate of return of 15%. This is the sticker price of the stock - what the stock should be priced at today to achieve the required rate of return for ten years.
Confirm that the Big 5 numbers are all consistant and above 10%.
The investment center is up and running! This is an excel document that calculates:
- Sticker price for a stock (How much one should pay for a share, based on a particular expected rate of return)
- the Big Five numbers (ROIC, Equity Growth, EPS Growth, Sales Growth, Cash Growth)
- The Ticker turns green if the current price is below 50% of the sticker price (50% margin of safety)