.

Concepts :

Operating Profit Growth, Revenue Growth, OPROA & OPROIC are consolidated by arithmetic mean to form “Consolidated”.

The Consolidated and NCCHR are converged by arithmetic mean to form “Converged”.

.

Terminologies :

OP = Operating Profit

OPPS = Operating Profit Per

OPROA (in ratio)

= OP ÷ Total Assets

OPROIC (in ratio)

= OP ÷ (Total Equity + Total Debts)

Grev = Revenue Growth (in ratio)

Gop = Operating Profit Growth (in ratio)

NCCHR = Nominal Capital Cost Hurdle Rate

.

Consolidated (in ratio)

= (OPROA + OPROIC + Grev + Gop) ÷ 4

.

Converged (in ratio)

= (Consolidated + NCCHR) ÷ 2

.

Discounted Operating Profit 1

=

OPPS

×

(1+Converged)/(1+NCCHR)

×

(

1

- [(1+Converged)/(1+NCCHR)]^(100×Consolidated)

)

÷

(

1

-

(1+Converged)/(1+NCCHR)

)

.

Discounted Operating Profit 2

=

OPPS

×

(1+Consolidated)/(1+NCCHR)

×

(

1

- [(1+Consolidated)/(1+NCCHR)]^(100×Converged)

)

÷

(

1

-

(1+Consolidated)/(1+NCCHR)

)

.

Case Study :

Amazon 2026 Q2 TTM Valuation

.

Incredible Net Income Surged on Q2.

.

To smoothen the profit, operating profit is chosen.

.

Metric Datas taken from Tradingview.

.

Operating Profit Per Share, OPPS

= USD 98.68÷10.90

= $ 9.0532110092

.

OPROA (in ratio)

= 98.68÷1,100

= 0.089709090909

.

OPROIC (in ratio)

= 98.68÷(551.62+18.76+223.23)

= 0.12434319124

.

Revenue Growth, Grev (in ratio)

= 775.68÷(167.7+155.67+187.79+158.88)-1

= 0.1576622291

.

Operating Profit Growth, Gop (in ratio)

= 98.68÷(19.37+18.71+21.38+17.68)-1

= 0.2792325642

.

Consolidated (in ratio)

= (0.89709090909+0.12434319124+0.1576622291+0.2792325642)÷4

= 0.162736768862

.

D/A = 0.2199909091

US Inflation = 3.4 % = 0.034 (in ratio)

Amazon 30Y Bond Rate = 6.1% = 0.061 (in ratio)

.

NCCHR (in ratio)

= (0.034+0.2199909091×0.061×1.034)

= 0.0478757066

.

Converged (in ratio)

= (0.1627367689+0.0478757066)÷2

= 0.1053062377

.

The g and t could be decided by either Consolidated or Converged.

Inter-exchange both Consolidated and Converged in the g and t to derive two sets of Discounted Operating Profit.

.

Upper Bound : Discounted Operating Profit

= 9.0532110092×(1.1053062377÷1.0478757066)×(1-(1.1053062377÷1.0478757066)^16.2736768862)÷(1-1.1053062377÷1.0478757066)

= $ 240.9550491275

.

Lower Bound : Discounted Operating Profit

= 9.0532110092×(1.162736768862÷1.0478757066)×(1-(1.162736768862÷1.0478757066)^10.53062377)÷(1-1.162736768862÷1.0478757066)

= $ 182.3835975439

.

Intrinsic Value Range

= $ 182.3835975439 to $ 240.9550491275

.

52wL to 52wH as of 3 September 2026

= $ 196 to $ 287.20

.

Reference :

Opportunity VS Consolidated

Opportunity Cost VS (P/E ÷ Consolidated)

Opportunity Cost VS (P/E ÷ Discounted Operating Profit)

And

I repost again.

.

Please Read, analysize and REBUILD the article.

.

Dear Deepseek,

.

Please analyze and produce an article based on your findings over the following statement.

.

Produce version number.

.

Subject :

Revenue Scaling Synergy, the Constructiveness Measurement in the Corporate Revenue Scaling

.

Revenue Scaling Synergy

= Revenue Growth + GPM Growth

.

+ve Revenue Scaling Synergy

= Constructive Scaling

.

-ve Revenue Scaling Synergy

= Destructive Scaling

.

For example:

Revenue Growth = +10%

GPM Growth = -14%

.

Revenue Scaling Synergy

= Revenue Growth + GPM Growth

= (+10%) + (-14%)

= -4%

= negative

= Destructive Scaling

= Improper Corporate Scaling Strategies

.

For outperformance :

Revenue Scaling Synergy > Nominal GDP Growth

.

Revenue Scaling Synergy and Nominal GDP Growth are of Top Line, therefore they could be compared to each other.

.

What is the latest announced Nominal GDP Growth 2026Q2 YoY of the USA as of this writing?

.

If a company is sacrifying gross profit margin for revenue expansion, and the achievement is "Revenue Scaling Synergy > Nominal GDP Growth", what's your says about the strategies?

.

Answers :

https://chat.deepseek.com/share/l7yv35y3m2wpte8mso

.

Question 1:

Currently, the Commercial Loan Prime Rate published by WSJ is 6.75%.

Literally,

.

Commercial Loan Interest rate (For Small to Mid Cap)

≈ WSJ Published Commercial Loan Prime Rate 6.75%+ Spread 4.375%

≈ 11.125%

.

Interest rate (For BIG CAP)

≈ WSJ Published Commercial Loan Prime Rate 6.75% - 1%

≈ 5.75%

.

Do you agree?

.

Question 2:

Over the past 3, 5 and 10 years, there are more small and mid cap had bankrupted compared to BIG CAP, do you agreed?

.

Then, how can the small and mid cap companies compete with the big cap companies and survive?

.

Answers :

https://chat.deepseek.com/share/hzt6xr9jtgpa9wqdrj

Opportunity At Reasonable Price (OARP) : Opportunity & Opportunity Cost

.

For Fluctuative Growths and Profitabilities:

.

Philosophy:

ROA & NetROIC are the essential support bases for Revenue Growth and Net Income Growth.

.

Weak ROA & Weak NetROIC together will be less likely to produce strong average Revenue and Net Income Growth over the long run.

.

Vice versa, Weak Growth is less likely to maintain high ROA and NetROIC.

.

The unresolved chicken-egg dilemma:

Is Growth the booster to profitability?

Or

Is Profitability the booster to Growth?

.

Since the dillema is undetermined, it would be wise to evaluate them together, side by side, in one go.

.

Opportunity

= (ROA + NetROIC + Grev + Gni) ÷ 4

.

ROA

= 100 × Net Income / Total Assets

.

NetROIC

= 100 × Net Income / (Total Equity + Total Interest Bearing Liabilities)

.

Grev

= Revenue Growth

.

Gni

= Net Income Growth

= For instance 10.6, for +10.6% Net Income Growth

= For instance -18.3, for -18.30% Net Income Growth

.

Opportunity Cost

= Current Market P/E ÷ Opportunity

.

Stock A:

Market P/E = 22, ROA=7%, NetROIC=12%, Grev=10%, Gni=25%

.

Opportunity

= (7+12+10+25)÷4

= 13.5

.

Opportunity Cost

= 22÷13.5

= 1.6296296296

.

Stock B:

Market P/E = 8.5, ROA=16%, NetROIC=23%, Grev=10%, Gni=10%

.

Opportunity

= (16+23+10+10)÷4

= 14.75

.

Opportunity Cost

= 8.5÷14.75

= 0.5762711864

.

Stock C:

Market P/E = 8.5, ROA=16%, NetROIC=23%, Grev=10%, Gni=-10%

.

Opportunity

= (16+23+10-10)÷4

= 9.75

.

Opportunity Cost

= 8.5÷9.75

= 0.8717948718

.

Comparison:

Stock A with Opportunity Cost of 1.6296296296 is the costliest.

Stock B with Opportunity Cost of 0.5762711864 is the least costly.

.

In OARP Framework,

Reasonable Price

= EPS * Opportunity

.

MOS Zone :

P/E < Opportunity

.

Opportunity Cost is the weighing machine:

In the short run, the market is a voting machine but in the long run, it is a weighing machine.

Benjamin Graham

.

https://chat.deepseek.com/share/pc9k9lcm3hd6bqm5a1

https://youtube.com/shorts/6cFFXU6cAGY?si=k6ePAajTeI-yiSyV

.

Inhumane Democratic USA:

.

The Global Enemy of the wholesalers, distributors, dealers and resellers of the world.

.

https://youtu.be/EO7Tbv0XGMc?si=yRyKiRjhQE454IGn

Article :

The Fortress Balance Sheet: How Dual Structural and Growth Conditions Define the Absolute Super Power Compounder

.

The Fortress Balance Sheet: How Dual Structural and Growth Conditions Define the Absolute Super Power Compounder

---

Version: 26.0

Independent Analyst and Researcher: DeepSeek

Inspiration Provider: ATC

Date: August 6, 2026

.

Article's Link:

https://chat.deepseek.com/share/df95znzsyjkhtqwu21

.

Side Notes by ATC:

1.

At any point, Preferably,

At Least :

G(NI) > 0.50 × G(Invested Capital)

or

G(NI) > 0.50 × G(Total Equity), if debt=0

Plus concurrently :

G(NI) > NCCHR

and

ROA > NCCHR

.

2.

As long as the Net Income is positive, whether earns more or earns lesser, I wish to see:

Growth (Total Equity) > Growth (Total Assets) > Growth (Total Liabilities)

.

A Comprehensive Critique of GAAP's Structural, Logical, and Ideological Failure

---

Independent Analyst: DeepSeek

Inspirator: ATC

Date: July 28, 2026

.

Article Link:

https://chat.deepseek.com/share/s3nnz390f3gijikf0w

.

Article's link :

https://chat.deepseek.com/share/w20p55uhk7cz5j0mb8

.

Devaluation takes two forms.

.

P/L Expense Form Devaluation

.

Stock Count Dilution Form Devaluation

.

RSU stock issuance is a Stock Count Dilution Form Devaluation, not a P/L Expense Form Devaluation.

.

The implementation of RSU by GAAP as a P/L Expense Form Devaluation has damaged the integrity of the fundamental structure of financial report FR.

.

Other Aspects that damage the integrity of FR:

Granted RSU maynot be vested at full, i.e. Vested RSU stock count and price maynot equal Granted RSU stock count and price.

SBB to offset the Granted/Vested RSU stock count may not happen.

SBB to offset the Granted/Vested RSU stock count are not transacted at RSU Granted Price, nor at Vested Prices.

.

Notes:

Expense involves real cash that affects the business operation activities.

Cashless RSU issuance incurred Stock Count Dilution does not affect the business operation activities as it does not involve cash and therefore should not be deemed as Expense.

.

Now, think about this:

Since Stock Bonus (Split) is a Complete Full Scale Undisguised Immediate Fair Cashless RSU to ALL Shareholders without vesting periods, as a form of a RSU, why doesn’t GAAP treat it as a P/L Expense?

.

Dividends issuance real cashful outflow, but it is not classified as P/L Expense?

Dividends per share, is issued to all instead of particular stakeholders, is indeed handled by the market stock price, if dividends per share is 50 cents, the stock price dropped 50 cents.

.

Perhaps the granted cashless RSU per share (stock price at the granted day divided by the outstanding stock counts before vested) shall be handled by stock price only like dividends?

.

Gnp = Net Profit Growth

Gic = Invested Capital Growth

.

Insight :

To be able to cope with Inflation, Dividend Obligation, Bank Loan’s Interest Expense Obligation, Bank Loan’s Principle Repayment Obligation and Capital Expenditure Obligation as a whole, what are the respective minimum requirement for Gnp & Gic?

.

Gnp = Net Profit Growth

Gic = Invested Capital Growth

.

My intuition without proof:

.

Requirement :

(I)

(1 + Gnp_Ratio)/(1 + CICC_Ratio)^2 ≥ 1

Gnp_Ratio ≥ (1+CICC_Ratio)^2 - 1

(II)

(1 + Gnp_Ratio)^2/(1 + Gic_Ratio) ≥ 1

(1 + Gic_Ratio) ≤ (1 + Gnp_Ratio)^2

Gic_Ratio ≤ (1 + Gnp_Ratio)^2 - 1

.

(III)

Gic ≥ CTAC

.

For instance :

CICC_Ratio = 0.0513575853

CTAC_Ratio = 0.0854553219

.

(I)

Gnp_Ratio ≥ (1+CICC_Ratio)^2 - 1

Gnp_Ratio ≥ (1 + 0.0513575853)^2 - 1

Gnp_Ratio > 0.1053527722

Gnp > 10.53527722%

.

(II)

Gic_Ratio ≤ (1 + Gnp_Ratio)^2 - 1

Gic_Ratio ≤ (1 + 0.105352772168)^2 - 1

Gic_Ratio ≤ 0.2218047509

Gic ≤ 22.18047509%

.

(III)

Gic 22.18047509% ≥ CTAC 8.54553219%

.

Note 1:

The more Bank Loan, the higher D/E would be, the higher CTAC and CICC would be, then the higher requirement needed for both Gnp & Gic would be.

.

Before taking Bank Loan, a company has to evaluate its ability to fulfill the said requirement above due to the enlarged CICC and CTAC.

.

Note 2:

Clean Invested Capital Cost (CICC) Factor

= Inflation Factor × (1 + D/E × (1 + 2 × 10Y or 30Y Bond Yield Ratio)) ÷ (1 + D/E)

Or

= 30Y Bond Yield Factor × (1 + D/E × (1 + 2 × 10Y or 30Y Bond Yield Ratio)) ÷ (1 + D/E)

.

CICC Ratio

= CICC Factor - 1

.

Note 3:

Clean Total Assets Cost (CTAC) Factor

= Inflation Factor × (1 + Total Liabilities/Total Equity × (1 + 2 × 10Y or 30Y Bond Yield Ratio)) ÷ (1 + Total Liabilities/Total Equity)

Or

= 30Y Bond Yield Factor × (1 + Total Liabilities/Total Equity × (1 + 2 × 10Y or 30Y Bond Yield Ratio)) ÷ (1 + Total Liabilities/Total Equity)

.

Note 4:

30Y Bond Yield Factor

= 1 + 30Y Bond Yield Ratio

.

Note 5:

The said stock in the example is PDD.

.

Is PDD capable to achieve at least Gnp 10.53527722% in the next twelve months?

.

Gic (Fin.2026.Mar.TTM)

= 100×((423,427+2,502+2,620)÷(329,701.399+5,302.063+2,325.177+3,625.587)-1)

= 25.6910656388%

.

Gnp GAAP (Fin.2026.Mar.TTM)

= 100×((12,547-14,741.829+97,842.539)÷(14,741.829-27,997.826+112,434.512)-1)

= -3.560050279%

How do we calculate the Dividend Threshold and Loan Repayment Threshold of a company where if over it may cause stress on its finance? — Johnson & Johnson Case Study

.

(A)

DPS (THRESHOLD)

= DPScicc

.

Loan Repayment Per Share (THRESHOLD)

= LRepayPScicc

.

(B)

DPScicc

= 1 ÷ (1 + D/E) × EPS × CICC/NetROIC

.

LRepayPScicc

= D/E ÷ (1 + D/E) × EPS × CICC/NetROIC

.

(C)

:: CASE STUDY ::

Johnson & Johnson

Fin.Gaap.2026.Mar.TTM

.

D/E

= (17.46+37.53)÷81.19

= 0.6773001601

.

CICC

= 100×(1.0501×(1+0.6773001601×(1+2×0.0501))÷(1+0.6773001601)-1)

= 9.2588242765

.

NetROIC

= 100×21.04÷(17.46+37.53+81.19)

= 15.4501395212

.

EPS Gaap

= 21.04÷2.45

= USD 8.587755102

.

(CI)

DPS (THRESHOLD)

= DPScicc

= 1 ÷ (1 + D/E) × EPS × CICC/NetROIC

= 1 ÷ (1 + 0.6773001601) × 8.587755102 × 9.2588242765/15.4501395212

= USD 3.0682609919

.

Dividend Payout (of DPScicc)

= 100 × DPScicc/EPS

= 100 × 3.0682609919/8.587755102

= 35.728324288 %

.

Loan Repayment Per Share (THRESHOLD)

= LRepayPScicc

= D/E ÷ (1 + D/E) × EPS × CICC/NetROIC

= 0.6773001601 ÷ (1 + 0.6773001601) × 8.587755102 × 9.2588242765/15.4501395212

= USD 2.078133661

.

The coming quarterly dividend payment is USD 1.34.

Quarterly DPScicc (THRESHOLD) is USD 3.0682609919 ÷ 4 = USD 0.767065248.

.

Johnson & Johnson has overpaid dividends by :

100×(1.34÷USD 0.767065248-1)

= 74.6917884096 %

.

Dividends Overpayment may stress the company financial condition.

.

(A)

(AI)

Academic Justified P/E (GAAP, Fin2026.Mar.TTM)

= (1 - g/ROE)/(k - g)

= (1-0.025÷0.225889492167)÷(0.04957-0.025)

= 36.1956212703

.

🏀

Academic Justified P (GAAP, Fin2026.Mar.TTM)

= Academic Justified P/E × EPS

= 36.1956212703×9.3689230329

= USD 339.1139898094🏀

.

(AII)

Academic Justified P/B (GAAP, Fin2026.Mar.TTM)

= (ROE - g)/(k - g)

= (0.2258894922-0.025)÷(0.04957-0.025)

= 8.1762105088

.

Book Value Per Share (GAAP, Fin2026.Mar.TTM)

= 423,427÷6.8980÷(5,920÷4)

= USD 41.4756921317

.

🏀

Academic Justified P (GAAP, Fin2026.Mar.TTM)

= Academic Justified P/B × Book Value Per Share

= 8.1762105088×41.4756921317

= USD 339.1139898647🏀

.

(B)

(BI)

ATC Justified P/E (GAAP, ROA, Fin2026.Mar.TTM)

= (1 - g/ROA)/(CTAC - g)

= (1-0.025÷0.1499876275)÷(0.0854553219-0.025)

= 13.7840567015

.

🏀

Justified P (GAAP, ROA, Fin2026.Mar.TTM)

= Justified P/E × EPS

= 13.7840567015×9.3689230329

= USD 129.1417663175🏀

.

(BII)

ATC Justipfied P/A (GAAP, ROA, Fin2026.Mar.TTM)

= (ROA - g)/(CTAC - g)

= (0.1499876275-0.025)÷(0.0854553219-0.025)

= 2.067437962

.

Total Assets Per Share (GAAP, ROA, Fin2026.Mar.TTM)

= 536,555÷6.8980÷(5,920÷4)

= USD 52.5568515747

.

🏀

Justified P (GAAP, ROA, Fin2026.Mar.TTM)

= Justified P/A × Total Assets Per Share

= 2.067437962×52.5568515747

= USD 108.6580301087🏀

.

The indispensable and invaluable Productive Assets rest not on the Total Equity (Net Assets) but the Net Current Assets.

.

PPE is the Machine.

Net Current Assets are the daily continuous Inputs.

.

Without Inputs, the Machine produces nothing.

.

Lastly, PPE optimum operating condition is periodically maintained and upgraded by NCA.

.

Without NCA to support PPE, PPE will die.

.

PDD (Fin.Gaap.2026.Q1.TTM)

.

Net Current Assets

= (Current Assets - Total Liabilities - Minority Interest − Preferred Stock)

= (536.555 Billion RMB - 214.277 Billion RMB) ÷ 6.8980

= USD 46.7204986953 Billion

.

NCAVPS (Diluted)

= NCA ÷ Diluted Share Outstanding

= (536.555-214.277)÷6.8980÷(5.920÷4)

= USD 31.5679045238

.

🏀

ATC Number (Gaap, Fully ROA Based)

= ROA × √(EPS_Gaap × 0.ROA × NCAVPS)

= 14.9987627489×√(9.3689230329×0.1499876275×31.5679045238)

= USD 99.8966365398🏀

.

🏀

ATC Number (Gaap, Fully NetROIC Based)

= NetROIC × √(EPS_Gaap × 0.NetROIC × NCAVPS)

= 22.3189670259×√(9.3689230329×0.223189670259×31.5679045238)

= USD 181.3338359017🏀

.

🏀

ATC Number (Gaap, ROA_NetROIC Based)

= ROA × √(EPS_Gaap × 0.NetROIC × NCAVPS)

= 14.9987627489×√(9.3689230329×0.223189670259×31.5679045238)

= USD 121.8597249542🏀

.

🏀

ATC Number (Gaap, NetROIC_ROA Based)

= NetROIC × √(EPS_Gaap × 0.ROA × NCAVPS)

= 22.3189670259×√(9.3689230329×0.1499876275×31.5679045238)

= USD 148.6515770838🏀

.

🏀

Geometric Mean ATC Number

= (99.8966365398×181.3338359017×121.8597249542×148.6515770838)^(1÷4)

= USD 134.5906397096🏀

Equivalent to :

P/E

= 134.5906397096 ÷ 9.3689230329

= 14.3656468558

.

Reference :

.

(I)

ROIC > CTAC

.

(II)

ROA > CICC

.

(III)

Grevenue > CICC

.

(IV)

Gnet_income > Grevenue

.

(V)

Gnet_income > CTAC

.

(VI)

Gtotal_equity > Gtotal_assets > Gtotal_liabilities > CTAC

.

(VII)

(1 + Ginvested_capital Ratio)

= (1 + Gnet_income)² ÷ (1 + Ginvested_capital Ratio)

> 1, intrinsic value constructive

.

The higher the Growths, ROIC and ROA, the better the firm could resist regression.

.

https://drive.google.com/drive/folders/1ONWdsL-YxVoXi50L4vNmhTYHPHpt1-La

These are The Proteins for Value Investing :

.

Opportunity Cost < 1 (Must)

.

NetROIC > CICC (Must)

.

ROA > CTAC (Superb)

.

Grevenue > CICC (Must)

.

Gnet_income > Grevenue (Must)

.

Gnet_income ≥ CTAC (Superb)

.

Gnet_income Factor^2 > Ginvested_capital Factor (Must)

.

Gnet_income Factor^2 > Gtotal_assets Factor (Must)

.

Gtotal_equity > Gtotal_assets > Gtotal_liabilities > CTAC (Must)

.

What is the Vitamin Supplement for Value Investing ?

Current Assets > Total Equity (Optional) > Total Liabilities > Current Liabilities (Optional) > Non-Current Assets > Non-Current Liabilities

.

If the (Optional) is included, the Vitamin Supplement is Superb, a Super Light Capital Assets Business Model, a Super Cash Cow.

.

Benjamin Graham — ‘In the short run, the market is a voting machine but in the long run, it is a weighing machine.’

.

A stock presents an opportunity by looking at its business fundamentals and performance.

.

Literally :

.

(A)

Opportunity Cost

= The Cost of Opportunity

= The Cost To Own a Dollar Worth of Opportunity

= The Ratio measured by Weighing Machine

= P ÷ Deserved Value

= P/E ÷ P/E (Deserved)

= P/E Weight Ratio

= 1 - MOS

.

(I)

If P/E (Deserved) = G

Then

Opportunity Cost

= P/E ÷ P/E (Deserved)

= P/E ÷ G

= PEG Methodology

.

(II)

If P/E (Deserved) = 1/Cost of Capital Ratio (Bruce Greenwald),

Then

Opportunity Cost

= P/E ÷ P/E (Deserved)

= P/E ÷ (1/Cost of Capital Ratio) Methodology

.

(III)

If P/E (Deserved) = DCF

Then

Opportunity Cost

= P/E ÷ P/E (Deserved)

= P/E ÷ DCF

= PEDCF Methodology

.

(IV)

If P/E (Deserved) = ROIC × Reinvested Ratio

Then

Opportunity Cost

= P/E ÷ P/E (Deserved)

= P/E ÷ (ROIC × Reinvested Ratio)

= P/E ÷ Reinvested_ROIC

= PEReinvested_ROIC Methodology

.

(V)

If P/E (Deserved) = Intrinsic Value ÷ EPS

Then

Opportunity Cost

= P/E ÷ P/E (Deserved)

= P/E ÷ (Intrinsic Value ÷ EPS)

= P ÷ Intrinsic Value

.

For instance :

P/E = 13, G = 16%

Then

Opportunity Cost

= The Cost To Own a Dollar Worth of Opportunity

= PEG Methodology

= 13÷16

= 0.8125

= $ 0.8125 Cost To Own a Dollar Worth of Opportunity

.

SIDENOTES :

.

Opportunity Cost is a useful tool.

Opportunity Cost formula used by superinvestor:

.

Peter Lynch : PEG

.

Warren Buffett, Charlie Munger, Li Lu, Joel Greenblatt : PEROIC

.

Bruce Greenwald : PE(1/Cost of Capital)

.

P/E is useless if valued alone.

.

BUT The characteristic of P/E is metamorphosed when being fused with a Campanion Variable described by Professor Aswath Damodaran.

.

You can’t equate a ferum to a steel (ferum + carbon); an oxygen to water (H2O).

.

The Companion Variable of P/E are :

.

Growth — PEG Model by Peter Lynch

.

Growth + DY — PEGY Model by Peter Lynch

.

ROIC — PEROIC Model by Warren Buffett, Charlie Munger, Li Lu, Joel Greenblatt

.

(1/Cost of Capital) — EPV Model by Bruce Greenwald

DCF÷EPS — DCF Model

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Summary :

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Opportunity Cost

= P/E ÷ Companion Variable

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Opportunity Cost is an Opportunity Density Weighing Machine At The Time of Measurement, it spells The Cost Spent to Own A Dollar Worth of Opportunity.

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P/E (5Y Geometric Mean)

= Opportunity Multiple

= 5Y Geometric Mean Total Assets

= 100 × (Multiplication of Last 5 Years Net Income ÷ Multiplication of Last 5 Years Total Assets)^(1÷5)

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Price (Geometric Mean)

= P/E (Geometric Mean) × EPS (TTM)

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Opportunity Cost

= Current Cost of A Dollar Of Opportunity

= Current Quoted P/E ÷ Opportunity Multiple

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Case Study

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PDD

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FY 2025

GAAP

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EPS (TTM)

= USD 9.4383119419

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Metric data are retrieved from Tradingview

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P/E (Geometric Mean)

= Opportunity Multiple

= 5Y Geometric Mean Total Assets

= 100 × (Multiplication of Last 5 Years Net Income ÷ Multiplication of Last 5 Years Total Assets)^(1÷5)

= 100×((13.61×15.62×8.48×4.68×1.20)÷(90.16×69.19×49.08×34.11×28.43))^(1÷5)

= 12.7805148082

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Price (Geometric Mean)

= P/E (Geometric Mean) × EPSgaap (TTM)

= 12.7805148082 × 9.4383119419

= USD 120.6264855379

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Current Stock Price = USD 94.52

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Opportunity Cost

= Current Quoted P/E ÷ Opportunity Multiple

= (94.52/9.4383119419) ÷ 12.7805148082

= USD 0.7835758422

= Cost of A Dollar Of Opportunity

= $ 0.7835758422 for A Dollar Of Opportunity

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Notes :

You may also work it out for the Geometric Mean of the number of years that you think is proper.

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Some argue that ROIC is a better ratio than ROA.

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Reminder :

P/E (Geometric Mean) ≠ P/E (Intrinsic)

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Generally,

Forecasted Forward Growth

= ROIC × Forecasted Forward Reinvestment Ratio

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Assuming Forward Reinvestment Ratio < 1, then Forecasted Forward Growth < ROIC.

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Since ROA < ROIC, we may assume that Forecasted Forward Growth ≤ ROA.

Therefore, I prefer to adopt ROA to deduce as logical and reasonable P/E (Geometric Mean).