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Interim Trend Growth of Operating Profit
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Interim Trend Growth of Operating Profit 5 years, 8 months ago #152

  • ilikrip
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I do not understand what the difference is between calculating growth by using the average slope of the loglinear growth and calculating it using CAGR. Would it not give you the same answer ?

thanks
panos

Re: Interim Trend Growth of Operating Profit 5 years, 8 months ago #153

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I'm sorry for the delayed reply. I do not use the trend growth rates in my analyses and had to track down the answer. The CAGR is what you would expect--the percentage growth rate that, compounded over the N periods that elapse between when X and Y are recorded, turns X into Y (Y = X * (1+CAGR)^N).

I am not certain about the "Trend Growth", but the description of the calculation makes it sound like some form of average annual return (i.e. 3 period YoY growth of 5%, 10%, and 15% would return 10%)--however, if the starting point is 1, the CAGR is defined by the following math:

Initial condition: 1
Final condition: 1*((1.05)*(1.10)*(1.15)) = 1.32825
Number of periods: 3
CAGR: 1.32825 = 1 * (1+CAGR)^3 -> CAGR ~= 9.924%

Re: Interim Trend Growth of Operating Profit 5 years, 8 months ago #154

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Hi the way I understood it is as follows

in your example the series would become
1 1.05 1.155 1.32825
so you take
log(1.05-1) + ( log 1.155-1.05) + log ( 1.32825-1.155) and average by 3 = 0.04109
if you raise to the power of 10 you get a return of 1.09924 same as yours

On a different subject I am confused about the fllowing

Free Operating Cash Flow Excluding Dividends-5 Year CAGR
This is the compound annual growth rate of Free Operating Cash Flow Excluding Dividends over the last 5 years. Free Operating Cash Flow Excluding Dividends is calculated as Cash Flow From Operations minus Capital Expenditures.

cash flow from operations should not include dividends. The way the definition says is calculated it does not seem to subtract anything ?

thanks
panos

Re: Interim Trend Growth of Operating Profit 5 years, 8 months ago #155

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The Reuters definition for Free Cash Flow does subtract out dividends paid. See: screener.co/component/content/article/55...985-text-and-article .

The metric you are looking at does not subtract out dividends paid.

There is some disagreement as to whether FCF should include or exclude dividends. Reuters has chosen to present it with dividends subtracted out.
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