Mistake #4 Confusing growth with maintenance Capex | 9 Valuation mistakes

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My name is Andrew Stotz and I've been valuing companies for decades. When I was Head of Research at CLSA, I was voted the No. 1 Analyst in Thailand two years in a row.

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Mistake #4 Confusing growth with maintenance Capex

In this video, I describe how to avoid most common valuation mistake #4 confusing growth CAPEX with maintenance CAPEX, based on the results of 500 of the largest companies in Asia.

What you will learn from this video:

What CAPEX stands for?
CAPEX consists of maintenance CAPEX and growth CAPEX
What is depreciation and how is it shown on the balance sheet and P&L?
Depreciation accounting concept compared with the economic concept or the difference between CAPEX economic value and accounting value.
Difference between fixed assets purchase and maintenance CAPEX.
Maintenance CAPEX is the minimum and should be roughly the same as depreciation.
Set CAPEX to around 150% of depreciation and higher/lower if the firm’s growth profile deviates from “normal”.

Want to know more about common valuation mistakes. Follow the links below:

1 Overly-optimistic revenue forecasts
   • Mistake #1 Overly-optimistic revenue forec...  

2 Underestimating expenses causing unrealistic profit
   • Mistake #2 Underestimating expenses causin...  

3 Growing fixed assets slower than revenue
   • Mistake #3 Growing fixed assets slower tha...  

4 Confusing growth with maintenance Capex
   • Mistake #4 Confusing growth with maintenan...  

5 Forecasting drastic changes in cash conversion cycle
   • Mistake #5 Forecasting changes in cash con...  

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