⁠Finding Compounders
An old Mohnish Pabrai(@MohnishPabrai ) Daily Herald article on his Transtech success. https://t.co/8ZxfXeJUIP
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⁠Invest In Assets 📈
Want to become the next Buffett? How is your writing? https://t.co/PUH3iEMZU6
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⁠Librarian Capital
Altria 24Q2 $MO (adj.)

Group Revenues Net of Excise -3.0%, EPS flat

Smokeables revenues -4.0%, OCI -2.0%
Cigarette volume -13.0% y/y

Oral Tobacco revenues +5.5%, OCI +1.8%
On! volume +37.3%
Category share 19.4% (-4.2% y/y, +1.8% q/q)

NJOY c-store retail share 5.5%, +1.3% q/q https://t.co/7yX7lq8Xfr
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⁠Invest In Assets 📈
The really big opportunities in life will be very few. So when you find a Lollapalooza, and you can see it, don't hang back like a timid rabbit. Step boldly and grab it. And don't do it small.

- Charlie Munger
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⁠Finding Compounders
The Role of ROIC by Epoch Investment Partners https://t.co/ILLNTvkk9d
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⁠Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $NVDA 🧘🏽‍♂️

•NTM P/E Ratio: 35.34x
•10-Year Mean: 34.68x

•NTM FCF Yield: 2.46%
•10-Year Mean: 3.36%

As you can see, $NVDA appears to be trading somewhere between fairly valued & overvalued

Going forward, investors can receive ~2% LESS in earnings per share & ~26% LESS in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $31.44B
•Long-Term Debt: $8.46B

$NVDA has a strong balance sheet, an AA- S&P Credit Rating, & 159x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2020: 19.1%
•2021: 19.1%
•2022: 26.0%
•2023: 16.2%
•2024: 60.5%
•LTM: 78.3%

RETURN ON EQUITY✅
•2020: 26.0%
•2021: 29.8%
•2022: 44.8%
•2023: 17.9%
•2024: 91.5%
•LTM: 115.7%

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

REVENUES✅
•2019: $11.72B
•2024: $60.92B
•CAGR: 39.04%

FREE CASH FLOW✅
•2019: $3.14B
•2024: $27.02B
•CAGR: 53.79%

NORMALIZED EPS✅
•2019: $0.17
•2024: $1.30
•CAGR: 50.21%

SHARE BUYBACKS❌ (nominal change)
•2019 Shares Outstanding: 25.00B
•LTM Shares Outstanding: 24.94B

MARGINS✅
•LTM Gross Margins: 75.3%
•LTM Operating Margins: 59.8%
•LTM Net Income Margins: 53.4%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~2% LESS in EPS & ~26% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $NVDA has to grow earnings at a 17.67% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be more than the (17.67%) required growth rate:

2025E: $2.74 (111.4% YoY) *FY Jan
2026E: $3.73 (36.0% YoY)
2027E: $4.34 (16.4% YoY)

$NVDA has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $NVDA ends 2027 with $4.34 in EPS & see its CAGR potential assuming different multiples

33x P/E: $143.22💵 … ~13.6% CAGR

32x P/E: $138.88💵 … ~12.3% CAGR

31x P/E: $134.54💵 … ~10.9% CAGR

30x P/E: $130.20💵 … ~9.4% CAGR

29x P/E: $125.86💵 … ~8.0% CAGR

As you can see, $NVDA appears to have attractive return potential IF we assume >31x earnings, a multiple below its 10-year mean & a multiple that‘a justified given the company’s growth rate & moat

Although my research leads me to believe that $NVDA is a fair consideration today at $104💵, I am personally less inclined to buy at these levels & would strongly consider $NVDA closer to $95💵 where I could reasonably expect ~12% CAGR assuming a 29x end multiple

#stocks #investing
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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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⁠Librarian Capital
New Boeing $BA CEO Kelly Ortberg, unlike outgoing CEO David Calhoun and COO Stephanie Pope *, does not have a degree in accounting

Instead, Ortberg studied mechanical engineering (Iowa)

(from Virginia Tech and Southwest Missouri State University respectively) https://t.co/4G6AKJnzzP
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