Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $MSCI 🧘🏽‍♂️

•NTM P/E Ratio: 37.26x
•10-Year Mean: 34.88x

•NTM FCF Yield: 2.94%
•10-Year Mean: 3.39%

As you can see, $MSCI appears to be trading above fair value

Going forward, investors can receive ~7% LESS in earnings per share & ~13% LESS in FCF per share 🧠***

Before we get into valuation, let’s take a look at why $MSCI is a good business

BALANCE SHEET🆗
•Cash & Short-Term Inv: $457.82M
•Long-Term Debt: $4.49B

$MSCI has an ok balance sheet, a BBB- S&P Credit Rating, & 6.62x FFO Interest Coverate

RETURN ON CAPITAL✅
•2019: 23.4%
•2020: 28.6%
•2021: 26.5%
•2022: 33.0%
•2023: 35.2%

RETURN ON EQUITY🆗
•2019: (463.5%)
•2020: (231.5%)
•2021: (239.3%)
•2022: (148.6%)
•2023: (131.4%)

*ROE negative due to heavy use of debt

$MSCI has strong return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2013: $0.91B
•2023: $2.53B
•CAGR: 10.76%

FREE CASH FLOW✅
•2013: $280.93M
•2023: $1.21B
•CAGR: 15.75%

NORMALIZED EPS✅
•2013: $2.16
•2023: $13.52
•CAGR: 20.13%

SHARE BUYBACKS✅
•2013 Shares Outstanding: 121.07M
•LTM Shares Outstanding: 79.84M

By reducing its shares outstanding 34%, $MSCI increased its EPS by 51% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 82.3%
•LTM Operating Margins: 54.8%
•LTM Net Income Margins: 45.4%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~7% LESS in EPS & ~13% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $MSCI has to grow earnings at an 18.63% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be less than the (18.63%) required growth rate:

2024E: $14.89 (10.1% YoY) *FY Dec
2025E: $17.05 (14.5% YoY)
2026E: $19.45 (14.1% YoY)

$MSCI has a great track record of meeting analyst estimates ~2 years out, but let’s assume $MSCI ends 2026 with $19.45 in EPS & see its CAGR potential assuming different multiples

34x P/E: $661.30💵 … ~8.9% CAGR

32x P/E: $622.40💵 … ~6.5% CAGR

30x P/E: $583.50💵 … ~4.0% CAGR

28x P/E: $544.60💵 … ~1.5% CAGR

As you can see, $MSCI appears to have attractive return potential if we assume >34x earnings, leaving us with no margin of safety

Given the multiple expansion over the last 10 years, deteriorating balance sheet, & a reduction in the growth rate, I’d demand greater value from $MSCI

I’d likely get more interested in $MSCI closer to $450💵 or at ~31x earnings (~16.5% below todays price)

#stocks #investing
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀𝐝𝐯𝐢𝐜𝐞. 𝐁𝐚𝐛𝐲𝐥𝐨𝐧 𝐂𝐚𝐩𝐢𝐭𝐚𝐥® 𝐚𝐧𝐝 𝐢𝐭𝐬 𝐫𝐞𝐩𝐫𝐞𝐬𝐞𝐧𝐭𝐚𝐭𝐢𝐯𝐞𝐬 𝐦𝐚𝐲 𝐡𝐚𝐯𝐞 𝐩𝐨𝐬𝐢𝐭𝐢𝐨𝐧𝐬 𝐢𝐧 𝐭𝐡𝐞 𝐬𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬 𝐝𝐢𝐬𝐜𝐮𝐬𝐬𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭.

𝐓𝐡𝐞 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐢𝐬 𝐢𝐧𝐭𝐞𝐧𝐝𝐞𝐝 𝐟𝐨𝐫 𝐢𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐚𝐥 𝐩𝐮𝐫𝐩𝐨𝐬𝐞𝐬 𝐨𝐧𝐥𝐲 𝐚𝐧𝐝 𝐬𝐡𝐨𝐮𝐥𝐝 𝐧𝐨𝐭 𝐛𝐞 𝐜𝐨𝐧𝐬𝐭𝐫𝐮𝐞𝐝 𝐚𝐬 𝐢𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐚𝐝𝐯𝐢𝐜𝐞 𝐭𝐨 𝐦𝐞𝐞𝐭 𝐭𝐡𝐞 𝐬𝐩𝐞𝐜𝐢𝐟𝐢𝐜 𝐧𝐞𝐞𝐝𝐬 𝐨𝐟 𝐚𝐧𝐲 𝐢𝐧𝐝𝐢𝐯𝐢𝐝𝐮𝐚𝐥 𝐨𝐫 𝐬𝐢𝐭𝐮𝐚𝐭𝐢𝐨𝐧. 𝐏𝐚𝐬𝐭 𝐩𝐞𝐫𝐟𝐨𝐫𝐦𝐚𝐧𝐜𝐞 𝐢𝐬 𝐧𝐨 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞 𝐨𝐟 𝐟𝐮𝐭𝐮𝐫𝐞 𝐫𝐞𝐬𝐮𝐥𝐭𝐬.

𝐈𝐧𝐟𝐨𝐫𝐦𝐚𝐭𝐢𝐨𝐧 𝐜𝐨𝐧𝐭𝐚𝐢𝐧𝐞𝐝 𝐢𝐧 𝐭𝐡𝐢𝐬 𝐭𝐰𝐞𝐞𝐭 𝐡𝐚𝐬 𝐛𝐞𝐞𝐧 𝐨𝐛𝐭𝐚𝐢𝐧𝐞𝐝 𝐟𝐫𝐨𝐦 𝐬𝐨𝐮𝐫𝐜𝐞𝐬 𝐛𝐞𝐥𝐢𝐞𝐯𝐞𝐝 𝐭𝐨 𝐛𝐞 𝐫𝐞𝐥𝐢𝐚𝐛𝐥𝐞, 𝐛𝐮𝐭 𝐢𝐬 𝐧𝐨𝐭 𝐠𝐮𝐚𝐫𝐚𝐧𝐭𝐞𝐞𝐝 𝐚𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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Have you ever stopped and stood in awe of how much price drives the narrative?

Take copper, for example.

At $3.75/lb, all we heard was China's collapsing RE market, the failed EV transition, and the coming US recession.

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#copper
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They allow for scaling with underlying operating leverage and agility, which might prove as an advantage with respect to peers. Having done the due diligence accelerates the underwriting of similar claims.

The following image illustrates Burford’s cumulative deployments and returns from engaging in this type of operation. Noticeably, incremental capital invested in this claim family experienced higher returns than prior deployments. For instance, asset 2 implied an extra deployment of $12 million dollars and brought in $26 million in gains.
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$AFM.V https://t.co/SFdIW1qJF6
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RT @marketplunger1: The IEA just released its Critical Mineral Market Review 2023.

The report provides valuable insights into the large and rapidly growing Critical Minerals Market.

A MUST-READ for metals investors.

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Stay tuned!
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Whenever someone projects something like, "Don't worry we really have this under control I swear."

Odds are, they don't, and they're screwed.

Higher for longer is here.

Got #gold?

Lol inflation about to rip some faces off. - Brandon Beylo
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 Q-Cap 
We did it Joe https://t.co/PAptc1ylvs
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The Long Investor
$ETH
Silver

Both finished the day with the same performance

Overall flat. https://t.co/478tcHywjh
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