Recently I calculate CAGR(Earning per share)for silverlake axis (from FY 2014 to 2018) and it turns out to be negative . With that I would like to check how do I actually set a projection growth rate for company with negative CAGR?
Is it ok to set projection growth rate above the CAGR if let say the current “negative CAGR” is due to increase in outstanding share and slight decrease in company earning during FY18(assuming EPS throughout FY2014 to FY2017 is more of less steady or has increase).
Hi Jun Song,
You can;t project growth when the company is having negative CAGR. Do note that Silverlake business consist of one volatile and the other recurring. The volatile segment is the one that cause the negative growth when banks pull back on the spending. The best way to value Silverlake is to use their average PE range on the recurring business.
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