Excess Returns = (Stable Return on equity – Cost of equity) x (Book Value of Equity per share) = (44.2% - 11.43%) x $48.43 $15.86 Terminal Value of Excess Returns = Excess Returns / (Cost of Equity - Expected Growth Rate) = $15.86 / (11.43% - 1.99%) $168.04 Value of Equity = Book Value per share + Terminal Value of Excess Returns USD48.43 + $168.04 $216.47
You can call it clever bookkeeping, but simplywall.st hasn't let me down on other stock picks yet.