GAW.L - another look

I saw an interesting discussion about GAW, and I responded with the following observation:

Good post. I recently bought GAW, BEFORE the profit warning. So I'm obviously not a happy bunny. Maybe I'm just rationalising, but I'm not sure GAW is such a bad investment.

Consider this. Forecasts for 2011 are 32.29p per share. 2012 are a little up on this. Let's do a fudge-factor and say that, in light of recently news, GAW can earn 30p in perpetuity in real terms; assuming it doesn't expand, and just sticks to its knitting. At a share price of 342p, that gives it an earnings yield at 8.7% - better than deposit accounts, that's for sure.

We might want to add inflation on top of that. The CPI is 3.3% pa, and the RPI is 4.7%. Let's split the difference, and say that inflation is 4%.

The combined return is therefore 12.7% (8.7+4) - which seems OK.