Question

I'm curently valuing Sanitas and in last 3 years and in projections it's Reinvestment rate is negative as a result of negative difference between capex and D&A.I want to make valuation from fundamental growth, rather than management estimates.What can I do with negative Re.Rate?Thanks in advance.

Answer 1

If you assume that it will continue into the future, your cash flows will exceed your earnings (which is not unusual) but your growth rates should reflect this as well

Answer 2

Aswath,you think it's better to use the FCFF projections by management estimates.They have made valuation,but there are some mistakes, such as double counting of cash.During the last 3 years Sanitas' Finance income was growing, but in projections it's 0.

Answer 3

The problem with management forecasts is that they are biased. I, personally, would never take management forecasts at face value.