I'm curious what drove the 7% cost of equity estimate? I'm glad to see people finally backing away from CAPM methods. And using PE ratios + growth estimates seems like a decent starting place at an index level, but it seems a bit recursive for an individual security. You're taking the market's assessment of valuation as an input, which kind of goes against the entire exercise of performing a valuation in the first place, and falls into a similar pitfall that CAPM creates.
Solid article, Tyler.
I'm curious what drove the 7% cost of equity estimate? I'm glad to see people finally backing away from CAPM methods. And using PE ratios + growth estimates seems like a decent starting place at an index level, but it seems a bit recursive for an individual security. You're taking the market's assessment of valuation as an input, which kind of goes against the entire exercise of performing a valuation in the first place, and falls into a similar pitfall that CAPM creates.
Agree with your thoughts. DG and FIVE stocks are undervalued, in my opinion, and I'm watching carefully for any developments.