Technology One (TNE) released their H1 19 results last week.  Company guidance for profit before tax (PBT) was a bit below market expectations and as a result the shares fell post result.  All pretty standard stuff. There were however, two quite interesting aspects from the result: The first was the restatement of FY 18 results [...]

A useful model from the Systems Frame is the distinction between the volatility within a system and the stability of that system. A system may be volatile in output, but stable in nature (or vice versa).   A particluar type of system instability is known as a regime shift (or phase transition), where the system has [...]

For all their perceived failures in front of the Banking Royal Commission, ASIC have certainly been busy doing one thing over the last decade or so –writing Regulatory Guides. At last count these numbered 269  – representing, at a guess, 10-15k pages of regulatory gumpf. RG 53, penned in July 2003, covers “The use of [...]

In recent posts on software companies (SaaSy Stories) and valuation (EV/Sales) we have discussed how EV/Sales is a useful valuation proxy for high growth software companies because: Current earnings are either negative or low - making earnings metrics ineffective; Gross margins are generally high and capital requirements low - making incremental return on capital very high; Current sales [...]

Telstra's latest downgrade has prompted another outpouring of critisism from market participants. Given a share price that is 15% below the 1997 IPO price, these are easy barbs to throw.  In this piece I want to speak in defence of Telstra.  Not in the specifics, because like everyone, over this 20 year period they have made [...]

In our post Output noise versus System Knowledge, we discussed the importance of distinguishing between the stability of a system and the volatility of its output.  The obvious next question is to understand what makes a system stable versus unstable.  A starting point for this is to classify the different systems involved. Investment Systems In any [...]

"There are two consequences in history; an immediate one, which is instantly recognized, and one in the distance, which is not at first perceived. These consequences often contradict each other; [...] look to the end of an accomplished fact, and you will see that it has always produced the contrary of what was expected [...]

SaaSy Disclosure There is a (very) small part of me that feels for Getswift.  Not that they should be held up as any sort of role models - clearly they have gilded the Lilly a bit here and been a bit cute on withholding some thorns there.  But this is hardly unique amongst start [...]

We have previously discussed the use of EV/Sales as a valuation tool.  In short, EV/Sales is useful where sales provide better information about future cash flows than current earnings. In this post we expand upon using EV/Sales in the case of cyclical stocks, starting with teh following examples:  contractor Cimic (CIM); supermarket retailer Woolworths (WOW); [...]

In  earlier editions of his book, "What works on Wall Street", James O'Shaughnessy desribed the Price to Sales Ratio as "The King of the Value Factors".  Whilst subsequent editions of the book make the more reasonable claim that Price/Sales vies with other value measures, the measure retains solid quantitative support. In this post we examine the [...]