I tried doing reverse DCF for Panama Petrochem stock, just to see with the current price, what are the implied market expectations. The results are astonishing and clearly indicate that at the current level, market may not have fully optimized its potential in reflecting its true worth as far as current price is concerned. It also checks out almost all-important parameters of my checklist which I published few days ago here:
Portfolio of a novice investor - Q&A: Questions & Answers / Portfolio Q&A - ValuePickr Forum
Sales Growth Rate:
Historical sales growth rate (CAGR) for the company over last 10 years has been 15% but the market is implying only 2%. Looking at this wide difference, it seems that market hasn’t valued its potential to the full extent.
ROIC
Historical growth rate for ROIC is around 18.5% but market is implying degrowth in ROIC which is reasonable as with this kind of company without any specific competitive advantage, ROIC may not sustain for a very long time.
Invested Capital
Historically, Invested capital has grown by 12% but market is implying only 3% which can again be a sign of undervaluation like the sales growth.
Disc: Invested and biased.