Aa plc dcf model & possible investment


51 5
Hi All,

First post to the forum :thumbs:

Essentially I am a hobby investor I take a longer term view of trading rather than intraday etc. I have recently began teaching myself to value companies using the discounted cash flow model.

Through doing my research I have found that for the most part companies tend to be fair valued. However I have recently been researching AA PLC the insurance and roadside recovery company.

From my initial research it seems like an an absolute bargain at the £0.80 share price currently. Even assuming modest growth <1% over the next 5 years and then no growth after that I have a target price of £1.10 - £1.50 a healthy increase on the current price.

I feel that the business can overreach these targets and begin growing again. Having listened to the earnings webcast the new CEO Simon Breakwell (previously a founder of Expedia & ran Uber Europe) seemed extremely bullish about the potential of the AA.

As a business most of their business is conducted in the over 50's market this is despite them having the largest driving school in the UK passing over 20,000 new drivers each year. They have launched new products aimed at the younger driver that tie in with the telematics cars are getting in ever more numbers allowing them to predict breakdowns. They also aim to grow their insurance business by targeting younger drivers through their telematic boxes, their new car genie product and breakdown cross selling between all aspects of the business.

I feel that if they only met a small percentage of their strategic goals the stock price could be >£1.60 an extremely good investment.

As stated earlier on I am new to DCF models and I hope to use this forum to improve my knowledge from likeminded people and those more experienced.

I will try to post my model for those of you interested to tear apart.

P.S not an AA shareholder, employee etc.


2 0
I would love to give it a go but never thought i would and i ended up earning a fortune and then bought shares in them and they hit the roof so i wasn't disappointed. i then actually signed up to them myself and earned more money.
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