Editing Agronomics Limited
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In a world where the consequences of climate change are becoming increasingly evident, Agronomics Limited stands out as a pioneer, leading the way towards a more sustainable future. The founders' vision, rooted in a deep desire to combat climate change through innovative food production, positions the company as not just a profitable investment but also a crucial player in the global movement towards a greener, more sustainable future. Investing in Agronomics Limited is not just about financial returns; it's about being part of a solution that our planet desperately needs. | * In a world where the consequences of climate change are becoming increasingly evident, Agronomics Limited stands out as a pioneer, leading the way towards a more sustainable future. The founders' vision, rooted in a deep desire to combat climate change through innovative food production, positions the company as not just a profitable investment but also a crucial player in the global movement towards a greener, more sustainable future. Investing in Agronomics Limited is not just about financial returns; it's about being part of a solution that our planet desperately needs. | ||
== Operations == | == Operations == | ||
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|- | |- | ||
|What's the estimated current size of the total addressable market? | |What's the estimated current size of the total addressable market? | ||
|$ | |$1,300,000,000 | ||
|Here, the total addressable market (TAM) is defined as the global | |Here, the total addressable market (TAM) is defined as the global brokerage market, and based on a number of assumptions<ref group="Note" name="Note01" />, it is estimated that the size of the market as of today (6th May 2023), in terms of revenue, is $1.3 trillion. | ||
|- | |- | ||
|What is the estimated company lifespan? | |What is the estimated company lifespan? | ||
|50 years | |50 years | ||
|Currently, | |Currently, Freetrade employs around 201, making the company a small organisation (less than 10,000 employees). That said, given the company's mission, we expect the company to grow to a large organisation, and research shows that the average lifespan of a large corporation is around 50 years.<ref>Stadler, Enduring Success, 3–5.</ref> | ||
|- | |- | ||
|What's the estimated annual growth rate of the total addressable market over the lifecycle of the company? | |What's the estimated annual growth rate of the total addressable market over the lifecycle of the company? | ||
|3% | |3% | ||
|Research shows that the growth rate of the global | |Research shows that the growth rate of the global brokerage market (i.e. the total addressable market) is similar to the growth rate of global gross domestic product, which has averaged (medium) around 3% per year in the last 20 years (2001 to 2022)<ref>https://www.macrotrends.net/countries/WLD/world/gdp-growth-rate</ref>. | ||
|- | |- | ||
|What's the estimated company peak market share? | |What's the estimated company peak market share? | ||
| | |1% | ||
|The Stockhub users estimate that especially given the leadership of the company, the peak market share of | |The Stockhub users estimate that especially given the leadership of the company, the peak market share of Freetrade is around 1%, and, therefore, suggests using the share amount here. As of 30th September 2021, Freetrade's current share of the market is estimated at around 0.0010%. | ||
|- | |- | ||
|Which distribution function do you want to use to estimate company revenue? | |Which distribution function do you want to use to estimate company revenue? | ||
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|What's the estimated standard deviation of company revenue? | |What's the estimated standard deviation of company revenue? | ||
| 5 years | | 5 years | ||
|Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on | |Another way of asking this question is this way: within how many years either side of the mean does 68% of revenue occur? Based on Freetrade's current revenue amount (i.e. £12.68 million) and Freetrade's estimated lifespan (i.e. 50 years) and Freetrade's estimated current stage of its lifecycle (i.e. introduction stage), the Stockhub users suggest using five years (i.e. 68% of all sales happen within five years either side of the mean year), so that's what's used here. | ||
|- | |- | ||
| colspan="3" |'''<div style="text-align: center;">Growth stages</div>''' | | colspan="3" |'''<div style="text-align: center;">Growth stages</div>''' | ||
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|Research suggests that a company typically goes through four distinct stages of cash flow growth.<ref>Levie J, Lichtenstein BB (2010) A terminal assessment of stages theory: Introducing a dynamic approach to entrepreneurship. Entrepreneurship: Theory & Practice 34(2): 317–350. <nowiki>https://doi.org/10.1111/j.1540-6520.2010.00377.x</nowiki></ref> Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation.<ref>Stef Hinfelaar et al.:, 2019.</ref> | |Research suggests that a company typically goes through four distinct stages of cash flow growth.<ref>Levie J, Lichtenstein BB (2010) A terminal assessment of stages theory: Introducing a dynamic approach to entrepreneurship. Entrepreneurship: Theory & Practice 34(2): 317–350. <nowiki>https://doi.org/10.1111/j.1540-6520.2010.00377.x</nowiki></ref> Research also shows that incorporating those stages into the discounted cash flow model improves the quality of the model and, ultimately, the quality of the value estimation.<ref>Stef Hinfelaar et al.:, 2019.</ref> | ||
In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company.<ref>Dickinson, 2010.</ref> A summary of the economic links to cash flow patterns can be found in the appendix of this report. The Stockhub users estimate that with | In addition, research shows that a key way to determine the stage which a company is in is by examining the cash flow patterns of the company.<ref>Dickinson, 2010.</ref> A summary of the economic links to cash flow patterns can be found in the appendix of this report. The Stockhub users estimate that with Freetrade's operating cash flows negative (-), investing cash flows negative (-) and its financing cash flows positive (+), the company is in the first stage of growth (i.e. the 'introduction' stage), and, therefore, it has a total of four main stages of growth. Note, to account for one-off events, the three-year average (median) amount was used to calculate the cash flows. | ||
|- | |- | ||
|What proportion of the company lifecycle is represented by growth stage 1? | |What proportion of the company lifecycle is represented by growth stage 1? | ||
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The Stockhub users estimate that the expected return of an investment in the company over the next five years is ccc%, which equates to an annual return of ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in five years time. The assumptions used to estimate the return figure can be found in the table below. | The Stockhub users estimate that the expected return of an investment in the company over the next five years is ccc%, which equates to an annual return of ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in five years time. The assumptions used to estimate the return figure can be found in the table below. | ||
Assuming that a suitable return level over five years is ccc% per year or less, and | Assuming that a suitable return level over five years is ccc% per year or less, and Pantheon Resources achieves its expected return level (of ccc%), then an investment in the company is considered to be an 'suitable' one. | ||
===What are the assumptions used to estimate the return?=== | ===What are the assumptions used to estimate the return?=== | ||
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|Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach<ref name=":5">Demirakos et al., 2010; Gleason et al., 2013</ref>, so that's the approach that he Stockhub users suggest to use here; nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach (the valuation based on the relative approach can be found in the appendix of this report). | |Research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach<ref name=":5">Demirakos et al., 2010; Gleason et al., 2013</ref>, so that's the approach that he Stockhub users suggest to use here; nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the using the relative valuation approach (the valuation based on the relative approach can be found in the appendix of this report). | ||
Freetrade has never paid cash dividends, and on 7th February 2022, it said that it currently does not anticipate paying any cash dividends in the foreseeable future. Accordingly, the Stockhub users suggest using the free cash flow valuation method (rather than the dividend discount model). | |||
|- | |- | ||
|Which financial forecasts to use? | |Which financial forecasts to use? | ||
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====Sensitivity analysis==== | ====Sensitivity analysis==== | ||
The main inputs that result in the greatest change in the expected return of the | The main inputs that result in the greatest change in the expected return of the Pantheon Resources investment are, in order of importance (from highest to lowest): | ||
#The size of the total addressable market (the default size is $ | #The size of the total addressable market (the default size is $ccc); | ||
# | #Pantheon Resources peak market share (the default share is ccc%); and | ||
#The discount rate (the default time-weighted average rate is | #The discount rate (the default time-weighted average rate is ccc%). | ||
The impact of a 50% change in those main inputs to the expected return of the | The impact of a 50% change in those main inputs to the expected return of the Pantheon Resources investment is shown in the table below. | ||
{| class="wikitable sortable" | {| class="wikitable sortable" | ||
|+Agronomics investment expected return sensitivity analysis | |+Agronomics investment expected return sensitivity analysis | ||
| Line 1,037: | Line 1,037: | ||
|ccc% | |ccc% | ||
|- | |- | ||
| | |Pantheon Resources peak market share | ||
|ccc% | |ccc% | ||
|ccc% | |ccc% | ||
| Line 1,172: | Line 1,172: | ||
===Relative valuation=== | ===Relative valuation=== | ||
As noted earlier in this report, research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the relative valuation approach. | As noted earlier in this report, research suggests that in terms of estimating the expected return of an investment over a period of 12-months or more, the approach that is more accurate is the discounted cash flow approach, so that's the approach that Stockhub suggests using to determine the estimated value of the company (the valuation based on the discounted cash flow approach can be found in the valuation section of this report); nevertheless, for completeness purposes, separately, the valuation of the company is also estimated using the relative valuation approach. | ||
====What's the expected return of an investment in | ====What's the expected return of an investment in Pantheon Resources using the relative valuation approach?==== | ||
Stockhub estimates that the expected return of an investment in Agronomics over the next 12-months is ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in one year time. The assumptions used to estimate the return figure can be found in the table below. | Stockhub estimates that the expected return of an investment in Agronomics over the next 12-months is ccc%. In other words, an £1,000 investment in the company is expected to return £ccc in one year time. The assumptions used to estimate the return figure can be found in the table below. | ||
====What are the assumptions used to estimate the return figure?==== | ====What are the assumptions used to estimate the return figure?==== | ||
ccc | |||
====Sensitivity analysis==== | ====Sensitivity analysis==== | ||
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The impact of a 50% change in those main inputs to the expected return of the Agronomics investment is shown in the table below. | The impact of a 50% change in those main inputs to the expected return of the Agronomics investment is shown in the table below. | ||
{| class="wikitable sortable" | {| class="wikitable sortable" | ||
|+ | |+Pantheon Resources investment expected return sensitivity analysis | ||
!Main input | !Main input | ||
!50% worse | !50% worse | ||
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|327% | |327% | ||
|} | |} | ||
===Beta risk profile=== | ===Beta risk profile=== | ||
{| class="wikitable" | {| class="wikitable" | ||
| Line 1,818: | Line 1,608: | ||
== References == | == References == | ||
__INDEX__ | __INDEX__ | ||