I don't understand the economic rationale behind valuation by multiples. What generally drives valuation is Free Cash Flow and growth. FDP has barely any growth, and pays a weak dividend of ~2%. Where is all the FCF going then if it's not on investing on growth or paying dividend? Why do we consider that FDP is trading at a fair valuation and it's worth comparing to? I consider a stock is fairly valued when the expected return going forward is around the market average of 8%. Is it really the case for FDP? It's been around the current price for 20 years. So based on this maybe it's FDP which is expensive and should trade lower, not the other way around. I am not saying Dole cannot have an upside potential, but I would much rather see an analysis based on DCF valuation.
In my experience multiples are used more than DCFs in commercial practice. DCFs tend to be overly academic with too many assumptions open to manipulation ("garbage in, garbage out" is an expression you often hear).
Congratulations on calling the acquisition of Hibernia, Conor!
Thank you Anders !
I don't understand the economic rationale behind valuation by multiples. What generally drives valuation is Free Cash Flow and growth. FDP has barely any growth, and pays a weak dividend of ~2%. Where is all the FCF going then if it's not on investing on growth or paying dividend? Why do we consider that FDP is trading at a fair valuation and it's worth comparing to? I consider a stock is fairly valued when the expected return going forward is around the market average of 8%. Is it really the case for FDP? It's been around the current price for 20 years. So based on this maybe it's FDP which is expensive and should trade lower, not the other way around. I am not saying Dole cannot have an upside potential, but I would much rather see an analysis based on DCF valuation.
In my experience multiples are used more than DCFs in commercial practice. DCFs tend to be overly academic with too many assumptions open to manipulation ("garbage in, garbage out" is an expression you often hear).
Really appreciate the feedback. Thanks