Foot Locker / Hist.Data / Zero Real Growth
Share Buyback vs. Dividend using P/S Ratios (Model SB‑DIV‑PS)
@SimSim 8 months ago
This model simulates the gain/loss to long-term shareholders from making a single share buyback, compared to making a dividend payout for the same amount of money. All future earnings are assumed to be paid out as dividends.
This model simulates the future share-prices using P/S (Price-To-Sales) ratios so the earnings can be zero or negative.
Keywords: DEMO FL
- Earnings = Sales (2021-2023) x Net Profit Margin (2004-2023).
- Zero real growth.
- Discount rate from historical S&P 500 5-7 year REAL avg. ann. returns (1971-2017) + 5% risk-premium.
- P/S ratio (2004-2023)
- This plot shows the probability distributions that are common for all simulation years.
- The P/S scale is multiplied with the simulated P/S ratio after the share buyback. This can be used to model a change in investor sentiment towards the stock after the buyback. When the scale is 100% it has no effect. When the scale is below 100% it lowers the P/S ratio after the share buyback, and when it is above 100% it raises the P/S ratio after the buyback.
- The discount rate is used along with the tax-rates for dividends and capital gains in the calculation of present values.
- This plot shows 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 Return on Intrinsic Value (ROIV) for investment periods between 1-10 years, when making a share buyback now for USD 100m at the current share-price of USD 26, as opposed to using the same amount of money to make a dividend payout now.
- Out of 100k simulation trials 100% had valid results. Outliers >10.0 IQR are removed.
- ROIV is invalid when the intrinsic value is zero or negative. ROB also works in those cases.
- If there are losses in some simulations, then the red boxes on the bottom show the probability of loss for each future year.
- This violin-plot shows the Return on Buyback (ROB) for investment periods between 1-10 years, when making a share buyback now for USD 100m at the current share-price of USD 26, as opposed to using the same amount of money to make a dividend payout now.
- Out of 100k simulation trials 100% had valid results. Outliers >10.0 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 2D histogram shows how different share-prices at the time of the share buyback would impact the Return on Intrinsic Value (ROIV) for all investment periods between 1-10 years, when making a share buyback for USD 100m, as opposed to making a dividend payout for the same amount.
- Out of 100k simulation trials 100% had valid results. Outliers >10.0 IQR are removed.
- ROIV is invalid when the intrinsic value is zero or negative. ROB also works in those cases.
- The x-axis shows a range of share-prices around the current share-price of USD 26, which is marked as a dashed blue line.
- The red box at the bottom shows the probability of loss, if a share buyback is made now at the current share-price of USD 26, when considering all investment periods between 1-10 years.
- This 2D histogram shows how different share-prices at the time of the share buyback would impact the Return on Buyback (ROB) for all investment periods between 1-10 years, when making a share buyback for USD 100m, as opposed to making a dividend payout for the same amount.
- Out of 100k simulation trials 100% had valid results. Outliers >10.0 IQR are removed.
- The x-axis shows a range of share-prices around the current share-price of USD 26, which is marked as a dashed blue line.
- The red box at the bottom shows the probability of loss, if a share buyback is made now at the current share-price of USD 26, when considering all investment periods between 1-10 years.
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