The second stage of our process is stock valuation.
Our bespoke valuation template records financial performance and forecasts future key metrics with an emphasis on understanding cash flow. This second stage is known as Q-Value.
Valuation is not an exact science. In some instances we may build a range of valuations given certain assumptions. The result is a target price that if attained will result in the sale of that particular stock. Target prices must be 15% above current price before we consider adding any stock to the portfolio.
The analysis is discounted cash flow based with a number of bespoke features. Q-Value develops our understanding of each business and the key drivers of value creation. Our assumptions are updated with any new information post a company visit, announcement, financial reporting or any other relevant event.
Q Value is focused on long term net cash generation with a natural fade in returns being built into the valuation over time.
Q Value is focused on net cash generation with a natural fade in returns being built into the valuation over time.