Why Coke Amatil's Share Price is Frozen

Forager's new recruit Daniel Mueller has had his first rant on our Bristlemouth blog. His target: Coca-Cola Amatil. This business has its fair share of problems. In my opinion, many of them pre-date current CEO Alison Watkins. But Daniel is no fan of the new strategy either. Back at its October 2014 strategy day, Watkins announced an earnings per share (EPS) growth target of mid-single-digit (I assume this means between 3% and 7%). With EPS having decreased 33% in two years, this target seemed rather underwhelming. Yet the analyst community loved it. Why? In the foggy world of forecasting earnings, management had provided a guiding light. Aside from the fact they picked a low starting point, what does this target actually mean for investors? They could have picked any number they liked. Should we be changing valuations just because they have a different target? Amatil's value will depend on real results, not spurious targets, and on that front there is plenty to worry about (VIEW LINK)

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Steve Johnson
Founder & Chief Investment Officer
Forager

Steve began Forager Funds in 2009, and now manages approximately $350m across two funds. Offering a listed Australian Shares Fund (FOR) and an unlisted International Shares Fund, Steve focuses on long-term investing in undervalued companies.

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