High growth companies normally have high multiples.
I created this table to show the relationship between growth and multiples
In short, a PE ratio of 50 requires a 20% earnings growth over 5 years to turn that multiple from 50 -> 20.
I optimise my portfolio for these metrics.
My aim is to maximise FCF ROC first, then FCF Growth, then FCF margin and then finally FCF yield.
* taken from my latest factsheet
PS: Long Equity runs a concentrated portfolio of value-creators and price-setters. We only hold companies that can (i) invest capital at significantly higher returns than their cost of capital (value creation), and (ii) raise prices without impacting demand (price setting).
Returns on capital must be high, consistent and unleveraged, with competitive advantages, ideally switching costs and network effects, preventing returns and margins from being competed away. We pursue a long-term strategy to minimise transaction costs and defer capital gains by investing in companies capable of compounding indefinitely.
https://longeq.com/wp-content/uploads/2022/08/Long-Equity-August-2022.pdf
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