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    100 50% ROIC (%) 10% Multiple 10 Valuation 1000 Current Earnings Power ($) Earnings Retained (%)

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    Rishab Wahal
    The document compares the valuations of two companies - an Undervalued Corp and a Reinvestment Corp - over a 10 year period. Undervalued Corp retains 50% of earnings, has a 10% ROIC and 10x exit multiple, resulting in a valuation of $1626 and 5% CAGR. Reinvestment Corp retains 100% of earnings, has a 25% ROIC and 36x exit multiple, resulting in a valuation of $9313 and 10% CAGR. So the Reinvestment Corp, which fully retains its earnings, achieves a higher valuation and growth rate.

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    100 50% ROIC (%) 10% Multiple 10 Valuation 1000 Current Earnings Power ($) Earnings Retained (%)

    Uploaded by

    Rishab Wahal
    49 views5 pages
    The document compares the valuations of two companies - an Undervalued Corp and a Reinvestment Corp - over a 10 year period. Undervalued Corp retains 50% of earnings, has a 10% ROIC and 10x exit multiple, resulting in a valuation of $1626 and 5% CAGR. Reinvestment Corp retains 100% of earnings, has a 25% ROIC and 36x exit multiple, resulting in a valuation of $9313 and 10% CAGR. So the Reinvestment Corp, which fully retains its earnings, achieves a higher valuation and growth rate.

    Original Description:

    Original Title

    Reinvestment Moat

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    The document compares the valuations of two companies - an Undervalued Corp and a Reinvestment Corp - over a 10 year period. Undervalued Corp retains 50% of earnings, has a 10% ROIC and 10x exit multiple, resulting in a valuation of $1626 and 5% CAGR. Reinvestment Corp retains 100% of earnings, has a 25% ROIC and 36x exit multiple, resulting in a valuation of $9313 and 10% CAGR. So the Reinvestment Corp, which fully retains its earnings, achieves a higher valuation and growth rate.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    49 views5 pages

    100 50% ROIC (%) 10% Multiple 10 Valuation 1000 Current Earnings Power ($) Earnings Retained (%)

    Uploaded by

    Rishab Wahal
    The document compares the valuations of two companies - an Undervalued Corp and a Reinvestment Corp - over a 10 year period. Undervalued Corp retains 50% of earnings, has a 10% ROIC and 10x exit multiple, resulting in a valuation of $1626 and 5% CAGR. Reinvestment Corp retains 100% of earnings, has a 25% ROIC and 36x exit multiple, resulting in a valuation of $9313 and 10% CAGR. So the Reinvestment Corp, which fully retains its earnings, achieves a higher valuation and growth rate.

    Copyright:

    © All Rights Reserved
    Download as XLSX, PDF, TXT or read online from Scribd
    Download as xlsx, pdf, or txt
    of 5

    Undervalued Corp.

    Current Earnings
    100
    Power ($)
    Earnings Retained
    50%
    (%)
    ROIC (%) 10%
    Multiple 10
    Valuation 1000

    Year Net Income Earnings Power


    1 5.0 105
    2 5.3 110
    3 5.5 116
    4 5.8 122
    5 6.1 128
    6 6.4 134
    7 6.7 141
    8 7.0 148
    9 7.1 155
    10 7.7 163

    Exit Multiple 15
    Year 10 Valuation 2439

    CAGR 9.3%
    Multiple on
    Original 2.4
    Investment
    Reinvestment Corp

    Current Earnings Power ($) 100

    Earnings Retained 100%

    ROIC 25%
    Multiple 20
    Valuation 2000

    Year Net Income Earnings Power


    1 25 125
    2 31 156
    3 39 195
    4 49 244
    5 61 305
    6 76 381
    7 95 477
    8 119 596
    9 149 745
    10 186 931

    13970

    21.5%

    7.0
    Undervalued Corp.
    Current Earnings
    100
    Power ($)
    Earnings
    50%
    Retained (%)
    ROIC (%) 10%
    Multiple 10
    Valuation 1000

    Year Net Income Earnings Power


    1 5.0 105
    2 5.3 110
    3 5.5 116
    4 5.8 122
    5 6.1 128
    6 6.4 134
    7 6.7 141
    8 7.0 148
    9 7.1 155
    10 7.7 163

    Exit Multiple 10
    Year 10 Valuation 1626

    CAGR 5.0%
    Multiple on
    Original 1.6
    Investment
    Reinvestment Corp
    Current Earnings
    100
    Power ($)

    Earnings Retained 100%

    ROIC 25%
    Multiple 36
    Valuation 3600

    Year Net Income Earnings Power


    1 25 125
    2 31 156
    3 39 195
    4 49 244
    5 61 305
    6 76 381
    7 95 477
    8 119 596
    9 149 745
    10 186 931

    9313

    10.0%

    2.6
    Walmart Inc.

    Bn $ 2006 2016 Change


    Net Income 11.2 14.7 3.5

    Equity 53.2 80.5

    Debt & Capital Lease 35 46.7

    Less Goodwill 12.2 16.7

    Total Capital Invested 76 110.5 34.5

    Cumulative 10 year Earnings 147.9


    Incremental Capital Invested 34.5
    Cumulative 10yr dividends 49.9
    Cumulative 10yr buybacks 60.1

    Reinvestment Rate (B13/B12) 23%


    Return on Incremental Capital
    Investments (D4/D9) 10%

    Value Compounding Rate of


    2.4%
    Company

    10yr CAGR for Walmart Stock 4.00%

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