The Value of Our Business
In 2021 the value of our business increased 22%.
- We believe that over the course of the next five years, we have a reasonable chance to increase our earnings by 5% per year. We believe this based on actual plans we already have in progress and our conservative estimates of the profits they will bring us.
- After five years, even though we have big dreams, we do not feel we can predict the future. Therefore, we assume (the unlikely) event that all earnings growth will stop forever
- We also assume (Here is an even less likely event) that the government will create a risk-free investment that pays 8% per year forever.
Our long-term goal is to increase both our operating income and our earnings from investees by 15% per year.
Pandemic recovery continued in 2022 and we made gains in our look-through earnings as well.
Investment earnings are still doing wonderfully grow at a significantly faster clip than we had thought.
Much of this is due to higher earnings of the S&P 500, which is fine with us because this growth takes zero effort on our part.
A lot of the gains also came from depressed stock market prices which have let us buy more look-through earnings at low prices. This is also fine with us because we can grow our look-through earnings for almost zero effort on our part.
Gains made in operations have been mixed though. We have seen an increase in revenue, but it came with a corresponding increase in costs that amounted to a very small gain over the year.
Altogether, we did fine, but it was a scrappy, up-and-down kind of year.
Outlook for the Future
Our outlook remains unchanged from last year. To wit:
We still have a goal of growing our look-through earnings by 15% per year.
But we also believe that earnings growth from the storefront will be slow as Covid recovery continues.
We still think the most likely course is that 3MM will continue to grow at a rate comparable to the US economy as a whole (about 5% per year) for the foreseeable future.
We expect most of our gains to come from the investment portfolio and we believe there will be more growth opportunities there than in the storefront.
2021 Annual Report
Look-Through Earnings
Our goal for 2021 was to grow our look-through earnings to $41,000.
We exceeded our goal! Our look-through earnings grew in 2022 to $44,000.
Using the Discounted Cashflow Method and the criteria from the beginning of this post, we calculate our intrinsic value to be about: $680,000.
By this time next year, we hope for our look-through earnings to grow to $50,000 and our intrinsic value to grow to at least $734,000.
Wish us luck!
