No. of Recommendations: 13
Hsy
Conservative EPS 7.92 base (3 year average) x 10% EPS growth x 5 years 12.76 x 20 multiple= 255, want a 12% return? equates to an entry price of $144 entry price.
23% overvalued?
I think using 3-year average EPS for a firm that has had EPS increase at (say) 9%/year for ages is a bit conservative.
It's not entirely unreasonable to think that the earnings in a couple/few years will be higher, rather than lower, than the current result.
Financial journalism analysts are mostly fools, but the range of their consensus for next year of $10.27 seems more plausible to me than your $7.92.
The 20 future multiple you posit is reasonably prudent, and I would normally buy it as a reasonable assumption if not a tad optimistic. Basically, the current levels.
I certainly would not count on more than that, but truthfully I expect a fair bit more.
In case anybody cares, I bit the bullet and opened a position yesterday. Not trivial.
Jim
