Alpha Quadrant Checklist (Financial Section Analysis) | Alpha Quadrant by The Fifth Person

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YEO asked 2 years ago

Hi AQ Team, It is noticed that certain Financial parameters with CAGR (example item 25 net profit CAGR for the last 5/10 years) is needed. Can you advise if there is any criteria to determine which time frame is appropriate for analysis given that CAGR can be different between new startup, growing and blue-chip companies? What is the company's P/E or P/CF valuation? --> is there any specific guideline on the time frame? What is the company valuation compared to its peers? --> advice needed if we are looking at P/E or P/CF? Or any other specific valuation?

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Victor Chng Staff answered 2 years ago

Hi Yeo,

1. Looking at 5/10 years CAGR ensures that you look at companies with track records already.

2. Regarding the PE and PCFO, it refers to plotting the PE or PCFO chart to see if the company is trading above or below its averages. I typically prefer ten years, if not a minimum of five years.

3. The PE/PCFO chart should be the primary valuation method. Comparing to peers is to find out if the company is always trading premium or below its peers. If it is consistently trading premium to peers due to its superior business, then when the company starts to trade below its peers' valuation, it may be a sign of undervaluation.