If this is true and you draw a straight-line through the EPS chart as Saul charts them then you get a stock price of around $190-200 about 18 months from now which would be about 33% IRR. That’s what I’m betting on…
Intuitively that feels about right to me as 30% to 35% is probably the low end of book value growth during that time. And I have hunch that we may get a few quarters in the high-30s as well. We’ll see.
Fletch
Hi saul
can you explain what you mean by “BOFI was up to $105, way ahead of itself”? Do you mean , the PE started increasing ? thanks
Hi usha, When I first bought BOFI the price was $27.75 or so, and earnings were $2.60 which gave them a PE of about 10 and a half and meant they were wildly undervalued (Trailing growth of earnings was about 20% at the time. About a year and a half later, they hit $106, and earnings were up to $3.50, which gave them a PE of 30, which is very high for a bank. Any bank. Rate of earnings growth was up to 27%.
Now they are about $94, and trailing earnings are $4.88, giving them a PE of 19 and a quarter, which is much more reasonable. Rate of earnings growth is up to 38.6%, which I feel makes them a very good investment again.
Hope this helps
Saul