Q: hello 5i:
would Operating Cash Flow be the best metric to use when valuing this company? If so, I see that historically, they've traded for long stretches of time for a ratio of under 6.0. Would you then agree that something under this ratio would present good value? If Adusted (Operating) Earnings is the best metric, would a PE of 20 or less be a good value to buy into?
thanks
Paul L
would Operating Cash Flow be the best metric to use when valuing this company? If so, I see that historically, they've traded for long stretches of time for a ratio of under 6.0. Would you then agree that something under this ratio would present good value? If Adusted (Operating) Earnings is the best metric, would a PE of 20 or less be a good value to buy into?
thanks
Paul L
5i Research Answer:
We think one can look at both metrics. EIF does largely trade as a dividend stock, so operating cash flow is probably more important for most shareholders. In the past decade, the average P/E fell as low as 12.5X in 2020, but with Covid that is an outlier. P/CF went under 5X that year as well. But more normalized ratios are closer to 19X and 7X, respectively. So yes we would agree below those the stock looks good.