TDR Growth Model


The investment philosophy is focusing on the enterprises with high growth. Thus, TDR's team researched, designed and created TDR Growth Model with the help from economists and mathematicians. With this model, we can balance between the growth and investment price of target companies and help us to make investment decisions.

TDR Growth Model formula:

      V0 / (1 + G / rf)n ≤ Vn / (1+N)

                 V0= Fully-diluted P/E for investment
                 G = Compound Annual Growth Rate (CAGR) for net profit 
                 rf= Risk-free rate
                 n = The number of years between the investment and exit 
                 Vn= P/E at exit
                 N = Multiple of return on investment 
 

The formula aims to analyze the relationship between the P/E for investment and net profit growth rate with the estimated multiple of return for the investment:

          Critical value V0 = Vn / (1+N) * (1 + G - rf)n
For the companies that we estimate to have the CAGR at G, the P/E for investment should not exceed V0, or the target return on investment could not be reached

          Critical value G = {(1 + N) * V0 /Vn}1/n + rf - 1
For the companies with investment P/E of V0, the CAGR should not be lower than V0, or the target return on investment could not be reached.

When V0 and Vn are fixed, the critical value of CAGR should be as the following:



When G and Vn are fixed, the critical value of investment P/E should not be over the following:

Diagram of investment return safe range:

Copyright @ TDR Capital All Right Reserved
粤IP备09100269号