⁠Dimitry Nakhla | Babylon Capital®
A quality valuation analysis on $BKNG 🧘🏽‍♂️

•NTM P/E Ratio: 22.76x
•3-Year Mean: 20.52x

•NTM FCF Yield: 5.35%
•3-Year Mean: 5.17%

As you can see, $BKNG appears to be trading near fair value

Going forward, investors can receive ~10% LESS in earnings per share & ~3% MORE in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $15.78B
•Long-Term Debt: $13.79B

$BKNG has a great balance sheet, an A- S&P Credit Rating, & 9x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2019: 33.3%
•2020: 2.7%
•2021: 14.2%
•2022: 29.1%
•2023: 47.3%
•LTM: 48.8%

$BKNG has strong ROIC, highlighting the financial efficiency of the business

REVENUES✅
•2014: $8.44B
•2024E: $23.43B
•CAGR: 10.74%

FREE CASH FLOW✅
•2014: $2.78B
•2024: $7.52B
•CAGR: 10.46%

NORMALIZED EPS✅
•2014: $53.31
•2024E: $182.76
•CAGR: 13.11%

SHARE BUYBACKS✅
•2014 Shares Outstanding: 53.02M
•LTM Shares Outstanding: 34.51M

By reducing its shares outstanding 35%, $BKNG increased its EPS by 54% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 84.7%
•LTM Operating Margins: 28.7%
•LTM Net Income Margins: 21.8%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~10% LESS in EPS & ~3% MORE in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $BKNG has to grow earnings at an 11.38% 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 (11.38%) required growth rate:

2024E: $182.76 (20.1% YoY) *FY Dec

2025E: $208.88 (14.3% YoY)
2026E: $241.36 (15.6% YoY)
2027E: $282.17 (16.9% YoY)

$BKNG has a decent track record of meeting analyst estimates ~2 years out, but let’s assume $BKNG ends 2027 with $238.17 in EPS & see its CAGR potential assuming different multiples

23x P/E: $6489💵 … ~13.0% CAGR

22x P/E: $6207💵 … ~11.3% CAGR

21x P/E: $5925💵 … ~9.6% CAGR

20x P/E: $5643💵 … ~7.8% CAGR

19x P/E: $5361💵 … ~6.0% CAGR

As you can see, $BKNG appears to have attractive return potential if we assume >22x earnings, a valuation above allowing for slight multiple compression, yet one that’s below its 3-year mean

Additionally, $BKNG EPS growth rate ( >12%) more than justifies a >22x multiple

Today at $4620💵 $BKNG appears to be a decent consideration for investment & fairly valued

I’d consider $BKNG a great purchase closer to $4300 (~18.50x multiple) roughly 7% below today’s share price or closer to 21x NTM estimates

This is where I can reasonably expect ~10.50% CAGR assuming a more conservative 20x 2027 earnings estimates, ensuring a substantial margin of safety & leaving room for potential multiple expansion

#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 𝐚𝐜[...]

𝐜𝐮𝐫𝐚𝐜𝐲.
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⁠Stock Analysis Compilation
Nightview Capital on Qualcomm $QCOM US

Thesis: Qualcomm's pivot to Automotive, IoT, and AI positions it for significant long-term growth beyond handsets

(Extract from their Q4 letter) https://t.co/INo4c7ubff
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⁠Startup Archive
RT @smithlife_: Growth is the result of solving these 3 challenges with precision.

1. Getting people in the door.
2. Delivering an 'aha' moment fast.
3. Providing core product value consistently.

Chamath Palihapitiya on the growth principles that got Facebook to billions of users

“The most important thing we did was I teased out virality, and said, ‘You cannot do it. Don’t talk about it. Don’t touch it. I don’t want you to give me any product plans that revolve around this idea of virality. I don’t want to hear it.”

Instead, Chamath urged the growth team at Facebook to focus on “the three most difficult and hard problems that any consumer product has to deal with”:

1. How do you get people in the front door?
2. How do you get them to an aha moment as quickly as possible?
3. How do you deliver core product value as often as possible?

Chamath warns that focusing on virality is why you see so many startups experience this amazingly steep rise and then fall off a cliff.

The second thing he set out to do at Facebook was invalidate all of the lore:

“In any given product, there’s always people who strut out around the office like, ‘I have this gut feeling.’ It’s all about gut feeling. And most people’s gut feelings are morons. They don’t know what they’re talking about. Gut feel is not useful because most people can’t predict correctly. We know this. So one of the most important things that we did was just invalidate all of the lore… You can’t believe your own BS. Because when you do, you start to compound these massively structural mistakes that don’t expose core product value… You don’t listen to customers because you think it’s all about your gut. You don’t bother doing any of the traditional, straightforward, obvious things, and you lose yourself.”

As Chamath explains, a maniacal focus on delivering core product value as frequently and fast as possible is what led Facebook to its most important realization:

“The single biggest thing we realized was to get any individual to 7 friends in 10 days. That was it… There was not much more complexity than that. There’s an entire team now of hundreds of people that have helped ramp this product to a billion users, based on that one simple rule — a very elegant statement of what it was to capture core product value… And then what we did at the company was talk about nothing else. Every Q&A. Every all-hands… It was the single, sole focus.”

He continues:

“You have to work backwards from: What is the thing that people are here to do? What is the ‘aha moment’ that they want? Why can I not give that to them as fast as possible? That’s how you win.”

Chamath recommends starting with a cohort of your most engaged users — What features are they using? What pathways in your product did they take? Then work backwards and try to get all of your other users to that same state. - Startup Archive
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⁠Quiver Quantitative
JUST IN: Senator Cynthia Lummis has been named the chair of the Senate Banking Subcommittee on Digital Assets.

We saw Lummis buy up to $100K of Bitcoin, $BTC, back in 2021.

She appears to have placed it into a blind trust in 2022.

You can track her portfolio on Quiver.
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⁠InsideArbitrage
The acquisition of Universal Stainless & Alloy Products $USAP by Aperam was completed on January 23, 2025. It took 98 days for the deal to be completed. https://t.co/pBkRO76Y4d
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⁠Quiver Quantitative
BREAKING: Representative Thomas Kean Jr. just disclosed a purchase of Canadian Pacific stock, $CP.

Canadian Pacific is a freight railway company.

It's the first time we've seen a politician buy the stock since 2014.

Kean Jr. sat on the House subcommittee on railroads. https://t.co/5lL7R6MxU6
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⁠Startup Archive
Ben Horowitz on the two things every successful technology startup must do

1. Build a product that improves how some large group of people does something by 10x. “You have to build a transformational product. There is no way to build a great new company without a great product… If you look at the great technology companies, the thing that distinguishes them is the ability to keep coming up with a better way of doing things.”

2. Taking the market. “You can come up with the best product, but if you don’t [take the market], you really don’t have a company. Most technology businesses are network effects businesses. You have to win… If you’re an engineer, what business skills do you need to build a technology company? They’re all around the skills that you need to win the market. How do you out-market, out-sell, and beat the competition?… Do you build a good enough company that you go win?”

Video source: @UCBerkeley (2009)
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⁠Startup Archive
RT @ArthurMacwaters: It's not enough to improve something 1-2x.

You have to improve that thing 10x plus. If you're not obsessed with this, you will likely fail.

In healthcare, it's super obvious. Make it cheaper, make it more intuitive/streamlined, and make it hyper-personal.

Ben Horowitz on the two things every successful technology startup must do

1. Build a product that improves how some large group of people does something by 10x. “You have to build a transformational product. There is no way to build a great new company without a great product… If you look at the great technology companies, the thing that distinguishes them is the ability to keep coming up with a better way of doing things.”

2. Taking the market. “You can come up with the best product, but if you don’t [take the market], you really don’t have a company. Most technology businesses are network effects businesses. You have to win… If you’re an engineer, what business skills do you need to build a technology company? They’re all around the skills that you need to win the market. How do you out-market, out-sell, and beat the competition?… Do you build a good enough company that you go win?”

Video source: @UCBerkeley (2009) - Startup Archive
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⁠Quiver Quantitative
Wow.

We posted this report earlier this month.

$GE has now risen 18% since Senator Capito's purchase.

Up another 6% today, after releasing quarterly earnings. https://t.co/Afm7VVa3Jq
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⁠Quiver Quantitative
Seeing many claims that the DOGE Clock on the US Debt Clock is tracking live savings.

It's not.

It's tracking the "real-time savings objective".

So it's presumably a pre-set counter that will count up to the savings goal over the course of the year.

Might work on writing code to track spending under the Trump vs. Biden, adjusting for inflation, to provide a more accurate savings metric - if there is interest.
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