Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $FDS ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 24.70x
โข10-Year Mean: 26.06x
โขNTM FCF Yield: 3.95%
โข10-Year Mean: 4.19%
As you can see, $FDS appears to be fairly valued
Going forward, investors can receive ~5% more in earnings per share & ~5% less in FCF per share***
Before we discuss valuation, letโs analyze why $FDS is a high-quality business
BALANCE SHEETโ
โขCash & Short-Term Inv: $522.10M
โขLong-Term Debt: $1.24B
RETURN ON CAPITALโ
โข2019: 34.7%
โข2020: 25.4%
โข2021: 24.9%
โข2022: 15.2%
โข2023: 18.9%
โขLTM: 20.2%
RETURN ON EQUITYโ
โข2019: 58.9%
โข2020: 47.5%
โข2021: 41.8%
โข2022: 33.8%
โข2023: 31.7%
โขLTM: 28.8%
$FDS has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $0.86B
โข2023: $2.09B
โขCAGR: 9.28%
FREE CASH FLOWโ
โข2013: $251.29M
โข2023: $584.79M
โขCAGR: 8.81%
NORMALIZED EPSโ
โข2013: $5.04
โข2023: $14.55
โขCAGR: 11.18%
$FDS consistent growth in revenues, free cash flow, & net income is impressive especially when you consider the company has increased its revenues annually since for more than 20 years
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 44.62M
โขLTM Shares Outstanding: 38.68M
โขShare Reduction: ~15.4%
By reducing its shares outstanding ~13.3%, $FDS increased its EPS by ~15.3% (assuming 0 growth)
PAID DIVIDENDSโ
โข2013: $1.32
โข2023: $3.74
โขCAGR: 10.97%
As you can see, $FDS is a quality business and the financials reflect its high % of recurring revenues ๐๐ฝ
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~5% MORE in EPS & ~5% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $FDS has to grow earnings at a 12.35% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be less than the (12.35%) required growth rate:
2024E: $16.29 (11.9% YoY) *FY Aug
2025E: $17.47 (7.3% YoY)
2026E: $19.33 (10.6% YoY)
$FDS has a good track record of meeting analyst estimates ~2 years out, so letโs assume $FDS ends 2026 with $19.33 in EPS & see its CAGR potential assuming different multiples:
26x P/E: $502.58๐ต โฆ ~10.1% CAGR
25x P/E: $483.25๐ต โฆ ~8.1% CAGR
24x P/E: $463.92๐ต โฆ ~6.1% CAGR
23x P/E: $444.59๐ต โฆ ~4.1% CAGR
As you can see, $FDS appears to have attractive return potential if we assume at least 26x earnings (a multiple at its 10-year mean & but may not be justified given its lower growth rate & excessively elevated multiple from 2020-2023 which skewed the average higher)
Today at $416๐ต $FDS appears to be fairly valued
Iโd get more interested in $FDS at $385๐ต or at ~22.85x NTM earnings (7.5% below todays price) where I can reasonably anticipate double-digit CAGR potential with a 24x end multiple
Thank you @isaac_b12 for the request
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
tweet
A sober valuation analysis on $FDS ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 24.70x
โข10-Year Mean: 26.06x
โขNTM FCF Yield: 3.95%
โข10-Year Mean: 4.19%
As you can see, $FDS appears to be fairly valued
Going forward, investors can receive ~5% more in earnings per share & ~5% less in FCF per share***
Before we discuss valuation, letโs analyze why $FDS is a high-quality business
BALANCE SHEETโ
โขCash & Short-Term Inv: $522.10M
โขLong-Term Debt: $1.24B
RETURN ON CAPITALโ
โข2019: 34.7%
โข2020: 25.4%
โข2021: 24.9%
โข2022: 15.2%
โข2023: 18.9%
โขLTM: 20.2%
RETURN ON EQUITYโ
โข2019: 58.9%
โข2020: 47.5%
โข2021: 41.8%
โข2022: 33.8%
โข2023: 31.7%
โขLTM: 28.8%
$FDS has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $0.86B
โข2023: $2.09B
โขCAGR: 9.28%
FREE CASH FLOWโ
โข2013: $251.29M
โข2023: $584.79M
โขCAGR: 8.81%
NORMALIZED EPSโ
โข2013: $5.04
โข2023: $14.55
โขCAGR: 11.18%
$FDS consistent growth in revenues, free cash flow, & net income is impressive especially when you consider the company has increased its revenues annually since for more than 20 years
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 44.62M
โขLTM Shares Outstanding: 38.68M
โขShare Reduction: ~15.4%
By reducing its shares outstanding ~13.3%, $FDS increased its EPS by ~15.3% (assuming 0 growth)
PAID DIVIDENDSโ
โข2013: $1.32
โข2023: $3.74
โขCAGR: 10.97%
As you can see, $FDS is a quality business and the financials reflect its high % of recurring revenues ๐๐ฝ
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~5% MORE in EPS & ~5% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $FDS has to grow earnings at a 12.35% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be less than the (12.35%) required growth rate:
2024E: $16.29 (11.9% YoY) *FY Aug
2025E: $17.47 (7.3% YoY)
2026E: $19.33 (10.6% YoY)
$FDS has a good track record of meeting analyst estimates ~2 years out, so letโs assume $FDS ends 2026 with $19.33 in EPS & see its CAGR potential assuming different multiples:
26x P/E: $502.58๐ต โฆ ~10.1% CAGR
25x P/E: $483.25๐ต โฆ ~8.1% CAGR
24x P/E: $463.92๐ต โฆ ~6.1% CAGR
23x P/E: $444.59๐ต โฆ ~4.1% CAGR
As you can see, $FDS appears to have attractive return potential if we assume at least 26x earnings (a multiple at its 10-year mean & but may not be justified given its lower growth rate & excessively elevated multiple from 2020-2023 which skewed the average higher)
Today at $416๐ต $FDS appears to be fairly valued
Iโd get more interested in $FDS at $385๐ต or at ~22.85x NTM earnings (7.5% below todays price) where I can reasonably anticipate double-digit CAGR potential with a 24x end multiple
Thank you @isaac_b12 for the request
#stocks #investing
___
๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: And I still believe market participants are underestimating $AMZN FCF growth potential ๐๐ฝ
#stocks #investing https://t.co/oPSI0YN0RD
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RT @DimitryNakhla: And I still believe market participants are underestimating $AMZN FCF growth potential ๐๐ฝ
#stocks #investing https://t.co/oPSI0YN0RD
Interesting to compare FCF Estimates of $AMZN $NVDA $GOOG & $MSFT ๐ต
โข By the end of 2028, $AMZN is projected to generate more FCF ($142.34B) than the rest ๐ธ
โข $NVDA is projected to nearly triple its FCF in 2 years (2024-2026) ๐คฏ
โข Despite $NVDA outstanding growth, $GOOG & $MSFT FCF projections are still impressive ๐
Current valuations:
โข $AMZN 1.96T
โข $NVDA 3.00T
โข $GOOG 2.25T
โข $MSFT 3.34T
Any thoughts? Comment below ๐๐ฝ
#stocks #investing tweet
Offshore
Photo
โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $DHR ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 30.69x
โข10-Year Mean: 25.18x
โขNTM FCF Yield: 4.34%
โข10-Year Mean: 3.24%
As you can see, $DHR appears to be trading above fair value
Going forward, investors can receive ~18% LESS in earnings per share & ~25% LESS in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $DHR is a quality business
BALANCE SHEETโ
โขCash & Short-Term Inv: $7.03B
โขLong-Term Debt: $16.42B
$DHR has a great balance sheet, an A- S&P Credit Rating, & 22x FFO Interest Coverage
RETURN ON CAPITAL๐*
โข2019: 6.2%
โข2020: 7.8%
โข2021: 10.3%
โข2022: 10.7%
โข2023: 7.4%
โขLTM: 7.2%
*ROIC relatively low partly due to $DHR growth strategy (acquisitions, capital allocation, etc)
RETURN ON EQUITY๐
โข2019: 8.3%
โข2020: 10.8%
โข2021: 12.8%
โข2022: 13.3%
โข2023: 8.2%
โขLTM: 7.8%
$DHR has decent return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2018: $17.05B
โข2023: $23.89B
โขCAGR: 6.97%
FREE CASH FLOWโ
โข2018: $3.44B
โข2023: $5.78B
โขCAGR: 10.93%
NORMALIZED EPSโ
โข2018: $7.58
โข2023: $4.52
โขCAGR: 10.89%
SHARE BUYBACKSโ
โข2018 Shares Outstanding: 0.70B
โขLTM Shares Outstanding: 0.74B
MARGINSโ
โขLTM Gross Margins: 58.9%
โขLTM Operating Margins: 21.9%
โขLTM Net Income Margins: 17.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~18% LESS in EPS & ~25% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $DHR has to grow earnings at a 15.35% 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 (15.35%) required growth rate:
2024E: $7.62 (0.5% YoY) *FY Dec
2025E: $8.74 (14.8% YoY)
2026E: $9.71 (11.0% YoY)
$DHR has a decent track record of meeting analyst estimates ~2 years out, so letโs assume $DHR ends 2026 with $9.71 in EPS & see its CAGR potential assuming different multiples
32x P/E: $310.72๐ต โฆ ~11.3% CAGR
28x P/E: $271.88๐ต โฆ ~5.5% CAGR
27x P/E: $262.16๐ต โฆ ~4.0% CAGR
26x P/E: $252.46๐ต โฆ ~2.5% CAGR
25x P/E: $242.75๐ต โฆ ~1.0% CAGR
As you can see, $DHR needs to trade above 32x to have attractive return potential
While possible, I wouldnโt want to rely on that assumption as it doesnโt leave us with any margin of safety
While the 10-year mean multiple is 25.18x, Iโd be content relying on somewhere closer to 27x - 28x earnings given $DHR quality, culture, competitive advantage, earnings growth rate & the quality of earnings, & long-term tailwinds in the sector
Yet, even at 27x - 28x earnings, the return potential outlook is bleak
Today at $240๐ต $DHR is trading at a substantial premium
Iโd become interested in $DHR closer to $200๐ต or at ~25.50x NTM earnings (roughly 16.7% below todayโs price)
At that price, I can reasonably expect ~12% CAGR while assuming 27x & ~10.2% CAGR while assuming 26x, a multiple I view as fair for $DHR
#stocks #investing
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๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐.
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A sober valuation analysis on $DHR ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 30.69x
โข10-Year Mean: 25.18x
โขNTM FCF Yield: 4.34%
โข10-Year Mean: 3.24%
As you can see, $DHR appears to be trading above fair value
Going forward, investors can receive ~18% LESS in earnings per share & ~25% LESS in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $DHR is a quality business
BALANCE SHEETโ
โขCash & Short-Term Inv: $7.03B
โขLong-Term Debt: $16.42B
$DHR has a great balance sheet, an A- S&P Credit Rating, & 22x FFO Interest Coverage
RETURN ON CAPITAL๐*
โข2019: 6.2%
โข2020: 7.8%
โข2021: 10.3%
โข2022: 10.7%
โข2023: 7.4%
โขLTM: 7.2%
*ROIC relatively low partly due to $DHR growth strategy (acquisitions, capital allocation, etc)
RETURN ON EQUITY๐
โข2019: 8.3%
โข2020: 10.8%
โข2021: 12.8%
โข2022: 13.3%
โข2023: 8.2%
โขLTM: 7.8%
$DHR has decent return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2018: $17.05B
โข2023: $23.89B
โขCAGR: 6.97%
FREE CASH FLOWโ
โข2018: $3.44B
โข2023: $5.78B
โขCAGR: 10.93%
NORMALIZED EPSโ
โข2018: $7.58
โข2023: $4.52
โขCAGR: 10.89%
SHARE BUYBACKSโ
โข2018 Shares Outstanding: 0.70B
โขLTM Shares Outstanding: 0.74B
MARGINSโ
โขLTM Gross Margins: 58.9%
โขLTM Operating Margins: 21.9%
โขLTM Net Income Margins: 17.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~18% LESS in EPS & ~25% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $DHR has to grow earnings at a 15.35% 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 (15.35%) required growth rate:
2024E: $7.62 (0.5% YoY) *FY Dec
2025E: $8.74 (14.8% YoY)
2026E: $9.71 (11.0% YoY)
$DHR has a decent track record of meeting analyst estimates ~2 years out, so letโs assume $DHR ends 2026 with $9.71 in EPS & see its CAGR potential assuming different multiples
32x P/E: $310.72๐ต โฆ ~11.3% CAGR
28x P/E: $271.88๐ต โฆ ~5.5% CAGR
27x P/E: $262.16๐ต โฆ ~4.0% CAGR
26x P/E: $252.46๐ต โฆ ~2.5% CAGR
25x P/E: $242.75๐ต โฆ ~1.0% CAGR
As you can see, $DHR needs to trade above 32x to have attractive return potential
While possible, I wouldnโt want to rely on that assumption as it doesnโt leave us with any margin of safety
While the 10-year mean multiple is 25.18x, Iโd be content relying on somewhere closer to 27x - 28x earnings given $DHR quality, culture, competitive advantage, earnings growth rate & the quality of earnings, & long-term tailwinds in the sector
Yet, even at 27x - 28x earnings, the return potential outlook is bleak
Today at $240๐ต $DHR is trading at a substantial premium
Iโd become interested in $DHR closer to $200๐ต or at ~25.50x NTM earnings (roughly 16.7% below todayโs price)
At that price, I can reasonably expect ~12% CAGR while assuming 27x & ~10.2% CAGR while assuming 26x, a multiple I view as fair for $DHR
#stocks #investing
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๐๐๐๐๐๐๐๐๐๐โผ๏ธ: ๐๐ก๐ข๐ฌ ๐ข๐ฌ ๐๐๐ ๐๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐. ๐๐๐๐ฒ๐ฅ๐จ๐ง ๐๐๐ฉ๐ข๐ญ๐๐ฅยฎ ๐๐ง๐ ๐ข๐ญ๐ฌ ๐ซ๐๐ฉ๐ซ๐๐ฌ๐๐ง๐ญ๐๐ญ๐ข๐ฏ๐๐ฌ ๐ฆ๐๐ฒ ๐ก๐๐ฏ๐ ๐ฉ๐จ๐ฌ๐ข๐ญ๐ข๐จ๐ง๐ฌ ๐ข๐ง ๐ญ๐ก๐ ๐ฌ๐๐๐ฎ๐ซ๐ข๐ญ๐ข๐๐ฌ ๐๐ข๐ฌ๐๐ฎ๐ฌ๐ฌ๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ.
๐๐ก๐ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ข๐ฌ ๐ข๐ง๐ญ๐๐ง๐๐๐ ๐๐จ๐ซ ๐ข๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง๐๐ฅ ๐ฉ๐ฎ๐ซ๐ฉ๐จ๐ฌ๐๐ฌ ๐จ๐ง๐ฅ๐ฒ ๐๐ง๐ ๐ฌ๐ก๐จ๐ฎ๐ฅ๐ ๐ง๐จ๐ญ ๐๐ ๐๐จ๐ง๐ฌ๐ญ๐ซ๐ฎ๐๐ ๐๐ฌ ๐ข๐ง๐ฏ๐๐ฌ๐ญ๐ฆ๐๐ง๐ญ ๐๐๐ฏ๐ข๐๐ ๐ญ๐จ ๐ฆ๐๐๐ญ ๐ญ๐ก๐ ๐ฌ๐ฉ๐๐๐ข๐๐ข๐ ๐ง๐๐๐๐ฌ ๐จ๐ ๐๐ง๐ฒ ๐ข๐ง๐๐ข๐ฏ๐ข๐๐ฎ๐๐ฅ ๐จ๐ซ ๐ฌ๐ข๐ญ๐ฎ๐๐ญ๐ข๐จ๐ง. ๐๐๐ฌ๐ญ ๐ฉ๐๐ซ๐๐จ๐ซ๐ฆ๐๐ง๐๐ ๐ข๐ฌ ๐ง๐จ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐ ๐จ๐ ๐๐ฎ๐ญ๐ฎ๐ซ๐ ๐ซ๐๐ฌ๐ฎ๐ฅ๐ญ๐ฌ.
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐.
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AkhenOsiris
$DDOG
Loop Capital reiterates Buy rating and $160 price target, to see at least modest upside in Q2 revenue.
Loop Capital analyst Yun Kim keeps a Buy rating and $160 price target on Datadog while noting that the firm anticipates "'at least a modest revenue upside" to its Q2. Loop notes that the qualitative checks into the company's business suggest that the overall usage trend around non-Al workloads in the quarter remained steady from Q1's positive trajectory, adding that its industry checks also indicated favorable spending trends for new cloud deployments in the first half, which should lead to a ramp of new workloads in the second half as these new deployments go into production.
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$DDOG
Loop Capital reiterates Buy rating and $160 price target, to see at least modest upside in Q2 revenue.
Loop Capital analyst Yun Kim keeps a Buy rating and $160 price target on Datadog while noting that the firm anticipates "'at least a modest revenue upside" to its Q2. Loop notes that the qualitative checks into the company's business suggest that the overall usage trend around non-Al workloads in the quarter remained steady from Q1's positive trajectory, adding that its industry checks also indicated favorable spending trends for new cloud deployments in the first half, which should lead to a ramp of new workloads in the second half as these new deployments go into production.
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