The Expected Return (Sustainable Growth) estimates the return that an investor might expect on an investment at a given point in time. This version uses the Sustainable Growth rate in the calculation.
According to Mary Buffett's "Buffettology", the sustainable growth rate can be calculated by:olliMultiplying the average 10 year rate of return on equity by the average retention ratio (this is 1 - average payout ratio).
This calculates the implied sustainable growth rate.
This rate can then be used to calculate the book value per share in year 10.
This in turn determines the 10 year EPS by multiplying the average return on equity by the projected book value per share.
To estimate the future price, you would then multiply the earnings by the average price-earnings ratio (plus any dividends) which then (theoretically!) produces the expected return based on the current price.
| Ticker | Name | Exp. Return | StockRank™ |
|---|---|---|---|
| LON:PEB | Pebble Beach Systems | 763.49% | 72 |
| LON:VIC | Victorian Plumbing | 419.16% | 83 |
| LON:PUAL | Puma Alpha VCT | 309.46% | 38 |
| LON:RMV | Rightmove | 238.65% | 74 |
| LON:DOCS | Dr Martens | 177.05% | 72 |