Sino Agro Food Inc (fka SIAF)

[RealDutch]

The big question relates to the Graham formula, which implies a p/e ratio of about 60 next year for instance.

Actually much higher. If the average annual growth rate = 66%
Then P/E multiple = 8.5 + 2xG = 8.5 + 2x66 = 140.5

A lot of people argue the formula is too aggressive. But it isn't assuming (1) you get the growth rate right and (2) you use a term of 7-10 years. Perhaps you could use 2G for a 10-year term, 1.5G for a 7-year term, and 1G for a 5-year term.

The problem is, getting the growth rate right. Because what usually happens is, growth slows down unexpectedly after a few years. But not with SIAF, right. We already have the land. We have the technology. We have the edge. And we have a plan. We just need financing to get this thing going.

Look at it this way. Let's assume a company will grow 100% every year for the next 7 years. Then Graham tells us the P/E should be 8.5 + 2G = 208.5. After the first year, P/E will drop to 104. After the 2nd year it will drop to 52. Because it's growing 100% every year. So after only 2 years it's already becoming cheap, with 5 years of 100% growth left.