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  5. FFH: EPS growth seems to be unpredictable due to the lumpiness of investment returns, and weather catastrophes. [Fairfax Financial Holdings Limited Subordinate Voting Shares]
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Q: EPS growth seems to be unpredictable due to the lumpiness of investment returns, and weather catastrophes. In the 2024 annual report Watsa uses Book Value per share compounding at 18.7% per year for the past 39 years and common stock price compounding at 19.2% (including dividends) as the main performance measure. Buffet suggests predictability of earnings as essential when buying a stock. Yahoo finance used to predict EPS growth 5 years out. While predicting EPS 5 years out is perhaps doable with confidence for KO, for FFH not so much. Clearly over 39 years FFH has done fabulous regardless of EPS lumpiness, but I have held this stock for over 10 years and all of the appreciation has come in the last 5 years or less. I want to buy more FFH, however I am concerned over another flat 5 years. Do you think the focus of the companies investing and underwriting strategy has changed enough to avoid 5 years of dead money? If you had to predict EPS growth for FFH over the next 5 years, what would that % growth be? Would you be comfortable buying at current prices for a 3-5 year hold? Thank you. John
Asked by John on December 01, 2025
5i Research Answer:

Because of the company's style, we can't do much about the earnings volatility. Value investments go in and out of favour, and monetization of assets can occur at anytime and skew results materially. 2018 to 2021 we think was an abberation. FFH barely made any money in 2018 and lost money in 2020. The past four years have been fabulous, yet the stock trades at 9X earnings. If we look at consensus numbers (with the same degree of uncertainty), analysts do expect very strong EPS for the next five years ($95 per share to $184). We might guess (not a prediction) for 15% earnings growth. We would be comfortable buying as long as an investors understands the company and has patience. The dividend is not great but there is at least 0.90% while one waits. But we think its long term record override the weak five year period. 

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