u/investorinvestor

Imagine if management somewhat successfully engineers a turnaround and normalized EPS grows by 50% from here. This is not particularly hard to do, given that management has already announced that they are planning to reduce the share count by roughly 12% per annum (at current prices) and have announced drastic cost-cutting measures. In such a scenario, markets would most definitely be slightly more optimistic than they currently are about the company’s prospects, and may assign a 2x increase to the multiple (i.e. 16x PE). Combined, the two should result in the share price rising threefold to about $120 in a successful turnaround.

Could having an investment target of 10% CAGR counterintuitively be better for your returns?

Many investors are bewitched by 2-3x gains overnight in the stock market. What this narrative misses however is how many people fail and lose substantial wealth in the process by reaching for the moon. Like most other things, having a disciplined process can help investors gain a firmer footing in volatile markets, which having a 10% CAGR target aims to help with.

In this article, we explore how having a 10% CAGR target especially helps amateur investors learn about pursuing risk:reward asymmetry, and refines their investment process by learning how to walk before they run.