freebirdcapitalThree questions that should precede every purchase: what would be a fair price? What return can be expected at today's price if the assumptions hold? And up to which price do I reach my target return? The logic follows the article The two keys to investment success. Pre-filled with its example company, valued at the rate-linked fair P/E.
Company
Valuation
My yardsticks
Blended earnings: with each month after the fiscal year-end, the earnings base shifts pro rata from last year's earnings to the current-year estimate — keeping the P/E comparable across the year. At 0 months, only last year's earnings count. Expected return = internal rate of return from today's price, the dividend growing each year and the price at the end, if earnings grow as assumed and the market values the company at the fair P/E (before taxes). The maximum price is the present value of the same payments at the target return.
Rate-linked fair P/E: a stock has to earn more than the risk-free bond. The fair P/E is therefore the reciprocal of reference rate plus premium — at 5.0 % and 2.5 points that is 100 ÷ 7.5 = 13.3 — and at most 15. Above 15 % earnings growth the growth rate still applies. The “automatic” mode uses 15 without reference to rates, and the growth rate above 15 % growth. The premium is a matter of judgement: earnings grow with inflation, a coupon does not. Reference rate as in the Freebird Rating, as of mid-September 2026.
How sensitive is the result?
Expected return per year at the current price if growth and end valuation differ from the assumption.
| Growth \ P/E at end | |||
|---|---|---|---|
original version without interest adjustment — only as a plausibility check
Background: Reading the price-to-earnings ratio properly · Method and rulebook. Runs entirely in your browser; no inputs are stored or transmitted.
