This Is How Jollibee Stock Will Look Like In 10 Years Time | The Investing Engineer PH

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This Is How Jollibee Stock Will Look Like In 10 Years Time

jollibee stock review

If you're unsure of your Jollibee stock investments, this post will help you see through the growth possibilities of the company 10 years from now.

Whether you're looking forward to buy this stock for the first time, add an existing position or take profits, this post is definitely for you.

We'll look into JFC's earnings, rate of returns and projected annual compounding rates. Understanding these data will help you make informed decisions.

For my previous analysis, you can read them here and here.

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10-Year Earnings Per Share

These are the EPS taken from Morningstar.com.

Year

Earnings Per Share

2016

5.64

2015

4.52

2014

4.96

2013

4.36

2012

3.51

2011

3.13

2010

3.07

2009

2.58

2008

2.25

2007

2.34

Growth rate

10.3%

Key take-away points:

  • check
    From 2007 to 2016, the earnings has shown a very nice upward trend showing no signs of slowing down. This is a good indicator of a good company that can grow its book value overtime.
  • check
    The data shows that earnings grow at a rate of 10.3% per year.

This simple analysis tells us directly of a possible economic moat that JFC possess. From this, we can say that JFC is really a good company to invest.

But at what price? We'll see below.

Average 10-Year P/E Ratio

The values are calculated by taking the averages of the P/E ratios based on the high, low and close of the last trading day of the year. The 10-year average is then calculated by getting the average from 2007 to 2016.

Year

Average P/E Ratio

2016

37.74

2015

46.87

2014

39.03

2013

35.27

2012

29.53

2011

27.33

2010

26.10

2009

19.19

2008

18.67

2007

21.94

Average 10-Year P/E Ratio

30.17

Key take-away points:

JFC's P/E ratio ranged from 18 to 46 and averaged at 30.17 for the last 10 years. This data is important to project the future price of the stock.

Initial Rate Of Return

Description

Values

Stock price

277.60

Earnings per share (EPS)

5.64

Initial rate of return

2.0%

10-yr. LCY gov't bond rate

5.8%

Price relative to a gov't bond

97.33

Key take-away points:

  • check
    If you buy the whole business at P301 billion (P277.60 x 1,085,321,234 shares outstanding), you expect to get a 2% return which is low.
  • check
    To get a return equal to a 10-year gov't bond which is 5.8%, you should own the stock at P97.33 per share.

Projected Annual Compounding Rate Of Return

Year

BVPS

EPS

REPS

DPS

Ave. P/E

Proj. Price

1

31.29

5.64

3.78

1.86

30.17

170.14

2

35.07

6.32

4.24

2.08

30.17

190.69

3

39.31

7.08

4.75

2.34

30.17

213.73

4

44.06

7.94

5.32

2.62

30.17

239.55

5

49.38

8.90

5.97

2.94

30.17

268.49

6

55.34

9.98

6.69

3.29

30.17

300.92

7

62.03

11.18

7.49

3.69

30.17

337.28

8

69.52

12.53

8.40

4.13

30.17

378.02

9

77.92

14.04

9.41

4.63

30.17

423.69

10

87.33

15.74

10.55

5.19

30.17

474.87

Where:

  • BVPS - Book value per share
  • EPS - Earnings per share
  • REPS - Retained earnings per share
  • DPS - Dividend per share
  • lightbulb-o
    P/E - Price to earnings

Key take-away points:

  • check
    The calculated projected price at the 10th year is P474.87 per share. If you bought the stock at P277.60 at the 0th year, your pre-tax CAGR would be 6.1%.
  • check
    Suppose you decide to sell the stock on its 10th year, your profit would be P197.27 per share (P474.87-P277.60). After paying taxes at a rate of 30%, your after tax profit would be P138.09 per share. Take note that this excludes dividends.
  • check
    Total projected dividends earned within the period equates to P32.77 per share. After paying 10% income tax, it now equates to P29.49 per share.
  • check
    Adding the after tax profits (capital gains and dividends) equates to P167.58. If you add that to the stock price (P277.60 + P167.58), the after tax proceeds now equates to P445.18. With this number, we can calculate our after tax CAGR and this equates to 5.4%.
  • check
    Retained Earnings Utilization - it can be argued that the increase in earnings which amounts to 3.30 (5.64 - 2.34) can be attributed to the effective use of its retained earnings. Total REPS from the period amounted to 24.04.  Overall, this gives a return of 13.7% (3.30/24.04).

From this analysis, we can conclude that buying JFC at P277.60 per share and holding it for 10 years will result to an annual growth rate performance of 6.1%. Selling it after 10 years will result to an annual growth rate performance of 5.4%.

In monetary terms, a P1 million investment in JFC will result to around P1.7 million after 10 years.

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Final Thoughts

Investing in JFC for the long-term I believe will definitely make our money grow. In 10 year's time, I expect JFC to reach at least P500 per share.

But in order to get higher returns, we should buy the stock on dips and corrections.

The best price to buy this stock to get at least 12% returns is around the P170 - P180 area. But will the stock drop at these levels? Maybe,.. or maybe not.

The stock has been overvalued for quite some time now. But if you're okay with a theoretical CAGR projections of 5% - 6%, then I can say that it's worth a buy. There are better stocks to consider while waiting for a good entry and one stock I'm looking into now is San Miguel Purefoods Company (PF).

Me? I'll still wait for a better price to enter. A profit taking scenario may drive the stock price down so possible retracements and monthly pivot point price levels should be watched.

This concludes my Jollibee stock review. Thanks for reading and if you have any comments and insights about this stock, I would love to see them in the comments section.

Happy investing!

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  • Jun says:

    Hi Mark,

    I have read one of your free PDF valuation technics, i was wondering where did you get the formula FV=EPS*(1+GROWTH%)^5*PE ratio. Sorry it is unrelated to the article posted, i was just curios about it and been testing it

  • Errol says:

    Thanks for your insight. May I ask paano yung formula in getting projected compounding price year after year? Thanks. This is very informative. Thanks!

    • Hi Errol,

      Mahabang proseso kasi yan eh. Para lang yan sa companies na may moat, and growing. Hindi yan applicable sa stocks na erratic and unstable ang earnings. Yan yung calculations na gingagamit ni Warren Buffett para malaman niya kung ok ba ang returns na makukuha niya sa isang company na may moat.

  • Morena says:

    Hi Mark,

    Thank you for sharing your knowledge and expertise. I recently downloaded your ebook to learn about stocks, it is very informative and useful. God bless you.

  • Heston says:

    Great Article Mark! As always, very informative!!

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