PI Industries - Superior Business Model

My valuation is based on a detailed DCF model.

Equity Valuation - PI Industries.xls (170 KB)

I have also explained my model here.

My whole point is when a company is selling at 23 times earnings, even small hichups matter. Table below shows various fundamental statistics for PI.

Source: Capitaline

PI has produced a CAGR of 49% over 5 years but 5 years ago its PE ratio was a reasonable 17. Once the PE ratio reached as high as 39 two years ago, stock returned only 3% in next 2 years despite producing a 36% CAGR in terms of EPS. Many investors here ignore the valuation risk and focus too much on fundamental risk. All I want to highlight is valuations do matter and especially when fundamentals may not look as good as the past.

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