Sally Beauty Holdings / Realistic / No-Growth
Internal Rate of Return of Stock using P/S Ratios (Model IRR‑STK‑PS)
@SimSim 11 months ago
This model simulates the Internal Rate of Return (IRR) of a company to long-term shareholders, where the excess cash and all future earnings are assumed to be paid out as dividends.
The future share-prices are simulated using P/S (Price-To-Sales) ratios so the earnings can be zero or negative.
The IRR is the discount rate that makes the Present Value of the future dividends and share-price equal to the current share-price. The IRR models are somewhat finicky with regard to the user-input and cannot always find the IRR.
Keywords: DEMO SBH
- Earnings simulated from historical Net Profit Margin (2011-2023) and recent sales (2022-2023).
- Earnings lowered by USD 100m for first 4 years to repay debt.
- P/S ratio low in years 1-4 (2017-2023), full range in years 5-10 (2011-2023).
- These plots show the probability distributions for individual simulation years.
- The dashed blue lines show the median P/S ratios calculated from the simulated Sales in each year, and the current Market-Cap (current share-price X number of shares) minus the Excess Cash. This lets you easily see if there is likely going to be a future loss or gain from re-valuation of the stock's P/S ratio.
- This violin-plot shows the Internal Rate of Return (IRR) for investment periods between 1-10 years, when the current share-price is USD 10.
- >99.9% of 100k simulation trials had valid results. Outliers >9.2 IQR are removed.
- If there are losses in some simulations, then the red boxes on the bottom show the probability of loss for each future year.
- This plot shows how different share-prices would impact the Internal Rate of Return (IRR) for all investment periods between 1-10 years.
- 99.1% of 100k simulation trials had valid results. Outliers >9.2 IQR are removed.
- The x-axis shows a range of share-prices around the current share-price of USD 10, which is marked as a dashed blue line.
- The red box at the bottom shows the probability of loss if the current share-price is USD 10, when considering all investment periods between 1-10 years.