Bank Of Nova Scotia is scored 30 for moat and 22 for management. The management score rests on a return on invested capital of 1.1% and a gross margin of 44.3% — figures that describe capital earning less than it costs to employ. The balance sheet carries debt at 5.80x equity, which magnifies both the returns above and the risk beneath them.
The price anchors are built on deliberately conservative assumptions. Growth is modelled at 15.0% a year, below the 19.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 16.1x. That produces an intrinsic value of $87.21, a 10-CAP price of $52.41 and a payback time price of $82.74, with the value zone set at the highest of the three, $82.74. Today's price of $90.67 sits 10% above it.
The price is above the value zone and the business scores 30 for moat and 22 for management. Neither test argues for paying up here.
| Price | $90.67 |
| Market cap | $110.5B |
| P/E ratio | 16.8x |
| Return on invested capital | 1.1% |
| Gross margin | 44.3% |
| Debt to equity | 5.80x |
| Free cash flow yield | 4.4% |
| Growth rate used | 15.0% |
| Growth rate measured | 19.0% |
| Exit multiple assumed | 16.1x |
| Company | Moat | Buy price |
| Can Imperial Bk Of Commerce (CM) | 60 | $224.14 |
| U.S. Bancorp (USB) | 49 | $105.65 |
| Ubs Group Ag-Reg (UBS) | 68 | $26.98 |
| Credicorp Ltd (BAP) | 64 | $236.87 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Bank Of Nova Scotia rather than accepting ours.