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ZA - Zuoan Fashion Ltd Fair Value Calculator

Earnings Per Share : $
  
Default value for Earning per Share (without none-recurring items) is the TTM GAAP earning. Use the information at right side to adjust.
Growth Rate In the Next:
Years : %
  
The number of years in the growth stage, and the average annual growth rate. The default value for the growth rate is the average Earings Per Share (eps) growth rate of the past 10 years. If this growth rate is high than 20% a year, it is set to 20%.
Business Predictability  
Terminal Growth Rate: %
  
After the growth stage, it is more reasonable to set the terminal growth rate at the inflation rate. The terminal growth rate must be smaller than the discount rate to make the calculation converge.
Years of Terminal Growth:
  
The number of years for terminal value calculation. The value after this is considered zero. Default is 10.
Discount Rate:
%
  
A reasonable discount rate assumption should be at least the long term average return of the stock market, which is about 11%, because investors can always invest passively in an index fund and get an average return. Some investors use their expected rate of return, which is also reasonable. A typical discount rate can be anywhere between 10% - 20%.
Tangible Book Value:
$
  
Default Book Value is the tangible book value, which may underestimate or overestimate the real value
Growth Value:
 
  
Cumulative earnings during the growth stage discounted to current using the discount rate.
Terminal Value:
 
  
Cumulative earnings during the terminal stage discounted to current using the discount rate.
= Fair Value:
 
  
Intrinsic Value = Future Earnings at Growth Stage + Terminal Value.
 
Margin Of Safety:
 

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User Comments

MichaelBoller
ReplyMichaelBoller - 1 day ago
I am still quite optimistic about this stock although the share prices did further fall. My calculated Beneish M score with the F/S 2013 shows that this company is clearly not a manipulator. In addition, total assets (excluding cash) are shrinking, usually a good sign for the further performance of a stock. (e.g. see the study "What explains the Asset Growth Effect in Stock Returns", Marc L. Lipson)
Jepierreny
ReplyJepierreny - 3 months ago
The market is absolutely clueless when it comes to this stock, ZA. This company is basically God's gift to individual investors, yet the public is refusing to accept this fabulous present. I don't know why. This company's fundamentals are are absolutely mind-boggling: double-digit net profit margins; virtually no debt; earnings per share that exceed the market-per-share price; a price-to-earnings ratio under 5; 5-year rising income, and sales, numbers; double-digit return on equity and assets since the company's inception; and a book value that's four times the size of its market price (which would be like purchasing a beautiful house valued at $800,000 for $200,000 - who wouldn't want such a sweet deal).

Zuoan has more CASH IN THE BANK than the value of all of its ADS shares combined. The company is literally drowning in cash. This is the kind of stock that Warren Buffett (Trades, Portfolio) (and all classic value investors, like myself) salivate over. But, because U.S. investors are currently prejudice against Chinese companies, the market price for ZA continues to lag. Well, that leaves more shares for me.

As the company's future earnings reports come out, and as management gets around to instituting a permanent dividend - which they are probably likely to do, as they have already agreed to give us a special 10% dividend distribution this upcoming June, 2014 - the rest of the market will realize the error of its ways, and investors will flock to this company in droves.

But for now, the Zuoan faithful must be patient, and continue to stock up on the company's shares, so that we can make a killing later on. It reminds me of the time when Warren Buffett (Trades, Portfolio) invested in the Chinese car company, BYD, not too long ago, picking up a hefty amount of stock at around $1/share. The public thought Buffett had lost his marbles. They ridiculed him for this investment choice in a foreign stock. And, indeed, BYD stock prices plummeted for a while after Buffett's acquisition, as the company faced industry and market challenges. But since then, the company has almost quadrupled its revenues, which has caused its profit margins to spike as well; and, of course, the stock price has skyrocketed to reflect the company's sound economic fundamentals. Value fundamentals which Buffett had the foresight to notice in 2009, before the investing public came around to it. Yep, that's right.

I view ZA just as Warren Buffett (Trades, Portfolio) did BYD. ZA is ranked #2 in sales in China, controlling a significant portion of the market share in the Chinese designer-clothing sector. Zuoan also has stores in almost all of China's provinces (which is a very difficult feat to accomplish, unless you have the cash to make it happen - which ZA does). Furthermore, Zuoan's young CEO, James Hong, was awarded Fashion Designer of the Year on multiple occasions by the China Fashion Association, and he currently owns a sizable stake in both the company's Chinese, and American, markets, which proves that management is not just talking the talk, but also walking the walk.

What more can you ask for, people.

Well, like Warren Buffett (Trades, Portfolio) said: "Be greedy when other's are fearful, and be fearful when others are greedy." For those of us who have chosen to keep, and grow, our ZA positions, I'm quite certain that we will be rewarded in the future. It may take some time, since the stock is a foreign stock, and therefore will be a victim of US-market discrimination. But, as a value investor, I've always used a company's balance sheets and income statements - and not the irrational whim's of the investing public - to make my decisions. And that's why my portfolios have never suffered a losing year.

So, to all my fellow Zuoan investors, invest on. And let's toast to a brighter day!
MichaelBoller
ReplyMichaelBoller - 4 months ago
What sounds good is that ZA (according to their website) is paying out a dividend of approx 10%! of the current price. This supports in my opinion that ZA has a credible business:

"The Company today announced that its Board of Directors has approved and declared a special cash dividend of US$0.05 per ordinary share on its outstanding shares to shareholders of record as of the close of trading on May 16, 2014. Holders of American Depositary Shares ("ADS"), each representing 4 ordinary shares of Zuoan, are accordingly entitled to the cash dividend of US$0.20 per ADS. The depository bank, Deutsche Bank, will distribute the dividends on June 10, 2014. "
MichaelBoller
ReplyMichaelBoller - 4 months ago
It is hard to believe how low this stock is trading. It seems to be a stock with one of the lowest valuation related to price / book, price /earnings or whatever valuation ratio on the stock market. I have no idea why the valuation is so low - the financials are strong and the company is profitable. In addition, the company has a reputational business and brand. Never mind the market.
MichaelBoller
ReplyMichaelBoller - 4 months ago
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