It was a very interesting meeting thanks to Roy , Justin and Mark for coming. A few items were discussed that I found very interesting
- How significant the stock options value are
- Margin of Safety
- Using 6 monthly financial reports
Stock options can cost 50% of the Annual Gross profit
If you look at a companies annual share volume and it steadily increases by a small number each year then the directors are probably giving themselves stock options. The value of these options is often significant. In JBHIFI it was worth about 10% of the revenue. The value is often between 10 to 20% of the gross profit.
Margin of Safety (10-17%)
To calculate the return I was looking to calculate price for JBHIFI I used 10%. This resulted in a price of around $25 for JB. Mark used a figure of 17% which together with a discount for the value of the stock options resulted in a value of around $12.
We also discussed the benefit of using the 6 month data instead of just the 12 months data
Our Analysis of JBHIFI can be found here
For Next Meeting
- We will tidy up our analysis for JBHIFI can be found here
- We will start analysis of a new company 1300 SMILES
- We present our analysis at our next meetup
