The calculations below outline how an intrinsic value for Australian Ethical Investment is arrived at using the Excess Return Model. This approach is used for finance firms where free cash flow is difficult to estimate.
In the Excess Return Model the value of a firm can be written as the sum of capital invested currently in the firm and the present value of excess returns that the firm expects to make in the future.
The model is sensitive to the Return on Equity of the company versus the Cost of Equity, how these are calculated is detailed below the main calculation.
Note the calculations below are per share.
See our documentation to learn about this calculation.
Excess Returns = (Stable Return on equity – Cost of equity) (Book Value of Equity per share)
A$3.52 = (35.44% – 8.55%) * A$13.09)
Terminal Value of Excess Returns = Excess Returns / (Cost of Equity - Expected Growth Rate)
A$60.76 = A$3.52 / (8.55% - 2.76%)
Value of Equity = Book Value per share + Terminal Value of Excess Returns
A$73.85 = A$13.09 + A$60.76Inputs used in model:
Stable EPS = Stable Book Value * Return on Equity
A$4.64 = A$13.09 * 35.44%
Source: Last reported Return on Equity.
Book Value of Equity per Share: A$13.09
Source: Last reported Book Value.
Expected Growth Rate: 2.76%
Source: Risk Free Rate/ 10 year Government Bond Rate in AUD.
Value per share:
Current discount (share price of A$145): -96.34%
The discount rate, or required rate of return, is estimated by calculating the Cost of Equity.
Discount rate = Cost of Equity = Risk Free Rate + (Levered Beta * Equity Risk Premium)
Discount rate = 8.55% = 2.76% + (0.8 * 7.24%)
The Levered Beta is the Unlevered Beta adjusted for financial leverage. It is limited to 0.8 to 2.0 (practical range for a stable firm). Note the market value of equity is used not the book value (A$162,534,850).
Levered Beta = Unlevered beta (1 + (1- tax rate) (Debt/Equity))
0.515 = 0.515 (1 + (1- 30%) (0%))
Levered Beta used in calculation = 0.8
Mr. Phillip A. Vernon, also known as Phil, BEc, MCom, MBA, FCA, FAICD is the Managing Director at Australian Ethical Investment Ltd. since July 2010 and serves as the Chief Executive Officer since December 2009 and Executive Director since July 27, 2010. He provides overall leadership and strategic direction to the company including acting as a direct liaison between the Board and the senior management team. Mr. Vernon is also a Director of Australian Ethical Superannuation Pty Limited and Australian Ethical Foundation Pty Limited. He is a Director of the Responsible Investment Association of Australia. Mr. Vernon is also a Director of Environmental Foundation and the Chairman Beyond Zero Emissions. He is a Fellow of the Australian Institute of Company Directors and the Australian Society of Certified Practicing Accountants. Mr. Vernon has a vast experience in financial services covering funds management, superannuation, corporate governance and industry regulation. He holds the FCA and FAICD designations. Mr. Vernon also holds B.Ec., M.Com., and M.B.A. degrees.
Average tenure of the Australian Ethical Investment management team in years:
Average tenure of the Australian Ethical Investment board of directors in years:
Check out our latest analysis for Australian Ethical Investment Breaking down the Price-Earnings ratio ASX:AEF PE PEG Gauge Feb 8th 18 The P/E ratio is a popular ratio used in relative valuation since earnings power is a key driver of investment value. … By comparing a stock’s price per share to its earnings per share, we are able to see how much investors are paying for each dollar of the company’s earnings. … Formula Price-Earnings Ratio = Price per share ÷ Earnings per share P/E Calculation for AEF Price per share = A$133.01 Earnings per share = A$2.7 ∴ Price-Earnings Ratio = A$133.01 ÷ A$2.7 = 49.3x On its own, the P/E ratio doesn’t tell you much; however, it becomes extremely useful when you compare it with other similar companies.Simply Wall St - – Full article
Check out our latest analysis for Australian Ethical Investment Was AEF's recent earnings decline worse than the long-term trend and the industry? … Australian Ethical Investment's most recent twelve-month earnings is A$2.9M, which compared to the prior year's level, has dropped by -8.22%. … You should continue to research Australian Ethical Investment to get a more holistic view of the stock by looking at: 1.Simply Wall St - – Full article
Phil Vernon took the helm as Australian Ethical Investment Ltd's (ASX:AEF) CEO and grew market cap to AUDA$146.84M recently. … Today we will assess Vernon’s pay and compare this to the company’s performance over the same period, as well as measure it against other Australian CEOs leading companies of similar size and profitability. … Considering AEF's size and performance, in terms of market cap and earnings, it appears that Vernon is paid on a similar level to other Australian CEOs of small-caps, on average.Simply Wall St - – Full article
View our latest analysis for Australian Ethical Investment What does AEF's beta value mean? … AEF's beta implies it may be a stock that investors with high-beta portfolios might find relevant if they wanted to reduce their exposure to market risk, especially during times of downturns. … An asset-heavy company tends to have a higher beta because the risk associated with running fixed assets during a downturn is highly expensive.Simply Wall St - – Full article
Australian Ethical Investment Ltd is a publicly owned investment manager. The firm launches and manages equity, fixed income, and balanced mutual funds for its clients. It invests in the public equity and fixed income markets across the globe. The firm invests in clean energy, sustainable products, medical solutions, innovative technology, responsible banking, healthcare, recycling, energy efficiency, education, and aged care. It does not invest in coal, coal seam gas, oil, weapons, tobacco, logging, exploitation, gambling, human rights abuses, and harmful products. Australian Ethical Investment Ltd was founded in 1986 and is based in Sydney, Australia.
|Name:||Australian Ethical Investment Ltd|
Australian Ethical Investment Ltd
130 Pitt Street,
New South Wales, 2000,
|Exchange Symbol||Ticker Symbol||Security||Exchange||Country||Currency||Listed on|
|ASX||AEF||Ordinary Shares||Australian Securities Exchange||AU||AUD||17. Dec 2002|
|CHIA||AEF||Ordinary Shares||Chi-X Australia||AU||AUD||17. Dec 2002|
|Asset Management and Custody Banks|
|Company Analysis updated:||2018/02/24|
|Last earnings update:||2017/12/31|
|Last annual earnings update:||2017/06/30|
All dates in UTC. All financial data provided by Standard & Poor’s Capital IQ.
Unless specified all financial data is based on a yearly period but updated quarterly. This is known as Trailing Twelve Month (TTM) or Last Twelve Month (LTM) Data. Learn more here.