[PODCAST] 'PE ratio, revenue growth and net debt to Ebitda are the important valuations when investing,' Kyle Wales of FlagshipAsset on MoneywebNow with SimonPB. Download the podcast below. Moneyweb Investing
SIMON BROWN: I’m chatting with Kyle Wales, a portfolio manager at Flagship Asset Management. Kyle, I appreciate the time. A recent note you sent out [was on] three equity-investing metrics to watch, and you kicked off with the good old-fashioned PE ratio.
KYLE WALES: Yes. So, as I’m sure your listeners as well would know, the economic climate is looking a bit dire at the moment. Many people are expecting the US, especially, to go into recession in the third or fourth quarter this year. Given that poor macro backdrop, you would actually expect shares to trade at a discount to their long-run multiples of around 16 times, but they’re currently trading at a small premium to their long-run averages.
KYLE WALES: Yes. Absolutely. I think most businesses are actually price-takers to some degree. It’s not just miners. It would include telecommunications companies, for example, [and] airlines especially. It really is those excellent best-in-class types of businesses which are able to pass increases in their input costs on to their customers.
KYLE WALES: Yes. I sort of referenced Unilever because, as you say, it, it is an example of an excellent company. There are some businesses that have been able to pass through price increases with very little pushback from the customers, like a lot of large software companies – Microsoft and those types of businesses. But even some very, very good businesses are struggling at the moment.
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