I have taken a look at Damodaran’s re-valuation for Tessa, the electric vehicle manufacturer. Perhaps unsurprisingly, he found it to be overvalued. I had a look for cars on the Tesla website, and they retail at 50 grand a pop. To be honest, I think that’s all the fundamental analysis you need! I’ll be sticking to my Volksy. Thanks.
But I digress. The point is that Tesla is a fast-growth speculative company, for which he provides a spreadsheet (see his post for a link). It shows that you can value even highly uncertain companies if you try. Although people might argue, with a point that I can concede, that you might think you can value them, but that valuation is illusory.
Undaunted, I thought I’d have a pop at valuing ASOS (LON:ASC) by adapting his spreadsheet. I was quite excited by the prospect, so my adaption was very slapdash, and hence probably wrong. Feel free to point out mistakes; but let’s not get into a flamefest here. The valuation should be considered fun only, and off-the-cuff. Valuations are highly sensitive assumptions, different people will have different assumptions, rightly or wrongly, which will affect the valuations they obtain. Got that?
Analysts have been throwing around lots of target prices lately, and I wonder to what extent the price targets are created with a view to the price action of the market, rather than an independent assessment of the cash flows. My “tl;dr” (Too Long, Didn’t Read) valuation of ASC was £20 a share, compared with the recent price of £51.23, suggesting that ASC is way overvalued. I have shared my spreadsheet, in case you want to look over the details and change the model to suit your liking. I’m not entirely sure that I’m using the right model, so that’s something I need to perform an additional check on.
I expect that everybody is going to hate my valuation. The bulls will undoubtedly say that I am being too conservative in my projections, and therefore undervaluing the shares. The value investors will think I am still suffering some kind of after-effects of anchoring bias or drinking some momentum Kool-Aid, as that would still put ASC on a PE of 35.
Let’s visit some key assumptions that go into the valuation. The first is that the revenue growth rate will be…
