⁠Dimitry Nakhla | Babylon Capital®
Yesterday I stated:

“Given its quality, moat, predictability, & growth rate, I am comfortable relying on 28x - 30x multiple, making $INTU a good purchase today at $560💵”

Today, $INTU opened +13%✅

As I suggested in the post attached below👇🏽

“While it’s certainly reasonable for $INTU to trade for 32x, I wouldn’t want to rely on that assumption as it doesn’t leave us with a substantial margin of safety

Yet, given its quality, moat, predictability, & growth rate, I am comfortable relying on 28x - 30x multiple, making $INTU a good purchase today at $560💵

I consider $INTU a strong purchase with a substantial margin of safety closer to $525💵, or ~27.60x NTM earnings (~7% below todays price)

Given today’s estimates, at $525💵 I can reasonably expect ~10% CAGR while assuming an attractive & conservative 26x multiple”

A quality valuation analysis on $INTU 🧘🏽‍♂️

•NTM P/E Ratio: 28.74x
•10-Year Mean: 33.55x

•NTM FCF Yield: 3.60%
•10-Year Mean: 3.68%

As you can see, $INTU appears to be trading somewhere below fair value & near fair value

Going forward, investors can receive ~16% MORE in earnings per share & ~2% LESS in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $3.36B
•Long-Term Debt: $5.63B

$INTU has a strong balance sheet, an A- S&P Credit Rating & 22x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 43.9%
•2020: 25.2%
•2021: 19.7%
•2022: 10.7%
•2023: 13.1%
•2024: 15.4%

RETURN ON EQUITY✅
•2019: 47.4%
•2020: 41.2%
•2021: 27.5%
•2022: 15.7%
•2023: 14.1%
•2024: 16.6%

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

REVENUES✅
•2014: $4.24B
•2024: $16.29B
•CAGR: 14.40%

FREE CASH FLOW✅
•2014: $1.34B
•2024: $4.69B
•CAGR: 13.34%

NORMALIZED EPS✅
•2014: $3.49
•2024: $16.94
•CAGR: 17.11%

PAID DIVIDENDS✅
•2014: $0.76
•2024: $3.60
•CAGR: 16.82%

SHARE BUYBACKS🆗
•2014 Shares Outstanding: 291.00M
•LTM Shares Outstanding: 284.00M

By reducing its shares outstanding ~2.4%, $INTU increased its EPS by ~2.5% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 79.6%
•LTM Operating Margins: 23.1%
•LTM Net Income Margins: 17.6%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~16% MORE in EPS & ~2% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $INTU has to grow earnings at a 14.37% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly less than the (14.37%) required growth rate:

2025E: $19.32 (14.1% YoY) *FY Jul
2026E: $22.13 (14.5% YoY)
2027E: $25.09 (13.4% YoY)

$INTU has a great track record of meeting analyst estimates ~2 years out, but let’s assume $INTU ends 2027 with $25.09 in EPS & see its CAGR potential assuming different multiples:

32x P/E: $802.88💵 … ~16.1% CAGR

31x P/E: $777.79💵 … ~14.6% CAGR

30x P/E: $752.70💵 … ~13.0% CAGR

29x P/E: $727.61💵 … ~11.5% CAGR

28x P/E: $702.52💵 … ~10.0% CAGR

While it’s certainly reasonable for $INTU to trade for 32x, I wouldn’t want to rely on that assumption as it doesn’t leave us with a substantial margin of safety

Yet, given its quality, moat, predictability, & growth rate, I am comfortable relying on 28x - 30x multiple, making $INTU a good purchase today at $560💵

I consider $INTU a strong purchase with a substantial margin of safety closer to $525💵, or ~27.60x NTM earnings (~7% below todays price)

Given today’s estimates, at $525💵 I can reasonably expect ~10% CAGR while assuming an attractive & conservative 26x multiple
___

𝐃𝐈𝐒𝐂𝐋𝐎𝐒𝐔𝐑𝐄‼️: 𝐓𝐡𝐢𝐬 𝐢𝐬 𝐍𝐎𝐓 𝐈𝐧𝐯𝐞𝐬𝐭𝐦𝐞𝐧𝐭 𝐀[...]

𝐝𝐯𝐢𝐜𝐞. 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. - Dimitry Nakhla | Babylon Capital® tweet

⁠Quiver Quantitative
JUST IN: Newly elected Representative Brad Knott has filed his first stock trades.

He bought stock in CompoSecure, $CMPO.

The company has a market cap of just $1.5B, and makes metal credit cards.

He is the first member of Congress that we have seen trading this stock. https://t.co/SkxJDoygi1
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⁠Mads Capital
The Juice is long $APP
About 10% of his portfolio
Maybe he "obviously sold it" yesterday?
Maybe his IBKR portfolio YTD is finally working again? https://t.co/voQq4vKEeU
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⁠Mads Capital
"I’m confident that free markets and personal liberties are right for America. I also believe these viewpoints are underserved in the current market of ideas and news opinion. I’m excited for us together to fill that void."
- Jeff https://t.co/dgjBVPSJUB

I shared this note with the Washington Post team this morning:

I’m writing to let you know about a change coming to our opinion pages.

We are going to be writing every day in support and defense of two pillars: personal liberties and free markets. We’ll cover other topics too of course, but viewpoints opposing those pillars will be left to be published by others.

There was a time when a newspaper, especially one that was a local monopoly, might have seen it as a service to bring to the reader’s doorstep every morning a broad-based opinion section that sought to cover all views. Today, the internet does that job.

I am of America and for America, and proud to be so. Our country did not get here by being typical. And a big part of America’s success has been freedom in the economic realm and everywhere else. Freedom is ethical — it minimizes coercion — and practical — it drives creativity, invention, and prosperity.

I offered David Shipley, whom I greatly admire, the opportunity to lead this new chapter. I suggested to him that if the answer wasn’t “hell yes,” then it had to be “no.” After careful consideration, David decided to step away. This is a significant shift, it won’t be easy, and it will require 100% commitment — I respect his decision. We’ll be searching for a new Opinion Editor to own this new direction.

I’m confident that free markets and personal liberties are right for America. I also believe these viewpoints are underserved in the current market of ideas and news opinion. I’m excited for us together to fill that void.

Jeff - Jeff Bezos
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⁠Mads Capital
THE JUICE ALMOST HEDGED $APP PERFECTLY:
"Of course I can get mad at myself for not selling all my $APP at $520 but it's pretty hard to time the tops perfectly"
"I sold 75-80% of my shares from $200 to $500, now a -40% pullback off the highs so I might start adding soon" https://t.co/eNchzI17Uw

The Juice is long $APP
About 10% of his portfolio
Maybe he "obviously sold it" yesterday?
Maybe his IBKR portfolio YTD is finally working again? https://t.co/voQq4vKEeU - Mads Capital
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⁠Quiver Quantitative
JUST IN: Representative Michael Baumgartner has proposed a bill to ban prop bets on student athletes. https://t.co/KLwaY4XdW1
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⁠Dimitry Nakhla | Babylon Capital®
Today at 3PM EST I will be posting my quality valuation analysis on a specific stock 👀

I’ve been following this stock for several years, and today it finally reached my price target where I’d feel comfortable adding the first tranche of shares 🤞🏽

Don’t miss it 🔔
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