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

•NTM P/E Ratio: 32.04x
•3-Year Mean: 33.08x

•NTM FCF Yield: 3.28%
•3-Year Mean: 3.20%

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

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

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

BALANCE SHEET🆗
•Cash & Short Term Inv: $2.81B
•Long-Term Debt: $24.00B

$TDG has an ok balance sheet & 1.59x FFO Interest Coverage Ratio (though small, its highest ratio in the past 5 years)

RETURN ON CAPITAL🆗➡️✅
•2021: 9.5%
•2022: 13.2%
•2023: 15.9%
•2024: 18.5%
•LTM: 19.2%

•$TDG is a serial acquirer (which usually leads to a lower ROIC) and yet still maintains a fairly attractive ROIC

RETURN ON EQUITY✅
•Negative ROE due to heavy use of debt

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

REVENUES✅
•2014: $2.37B
•2024: $7.94B
•CAGR: 12.85%

FREE CASH FLOW✅
•2014: $0.51B
•2024: $1.88B
•CAGR: 13.93%

NORMALIZED EPS✅
•2014: $7.76
•2024: $33.99
•CAGR: 14.04%

SHARE BUYBACKS❌
•2018 Shares Outstanding: 55.60M
•LTM Shares Outstanding: 57.80M

MARGINS✅
•LTM Gross Margins: 59.1%
•LTM Operating Margins: 45.3%
•LTM Net Income Margins: 18.7%

***NOW TO VALUATION 🧠

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

Using Benjamin Graham’s 2G rule of thumb, $TDG has to grow earnings at a 16.02% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be less than the (16.02%) required growth rate:

2025E: $36.96 (8.7% YoY) *FY Dec

2026E: $41.92 (13.4% YoY)
2027E: $48.07 (14.7% YoY)

$TDG has a decent track record of meeting analyst estimates ~2 years out so let’s assume $TDG ends 2027 with $48.07 in EPS & see its CAGR potential assuming different multiples:

33x P/E: $1586💵 … ~10.6% CAGR

32x P/E: 1538💵 … ~8.9% CAGR

31x P/E: $1490💵 … ~7.2% CAGR

30x P/E: 1442💵 … ~5.5% CAGR

29x P/E: $1394💵 … ~3.7% CAGR

28x P/E: 1345💵 … ~1.9% CAGR

As you can see, $TDG appears to have attractive return potential if we assume >33x EPS (near its 3-year mean) — however, this leaves us with little margin of safety

On the other hand, current estimates may not accurately reflect future acquisitions, price increases, etc that could increase future growth expectations (a crucial part of $TDG long-term growth track record)

Today at $1295💵 $TDG appears to be a fair consideration for investment with little margin of safety

I consider $TDG a strong consideration for investment closer to $1150💵 (11% below today’s price, 28.45x NTM Est) where I could reasonably expect a ~12% CAGR while relying on a 30x 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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Umesh
Amazing prompt! https://t.co/ECLvyse8k7

🎨 CELESTIAL MANDALA ODYSSEY 🎨

Prompt :

[SUBJECT] at the center of a Celestial Mandala Odyssey, surrounded by intricate, swirling patterns of [COLOR1] and [COLOR2] that evoke the harmony of the cosmos.

Check ALTS https://t.co/ORaKql4vO9 - LudovicCreator
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Umesh
Less Juggling, More Making: Firefly Boards as the Single Launchpad for AI Video
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Investing visuals
It ain’t much but it’s honest work. https://t.co/OtbeCcEbdy
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Yellowbrick Investing
Bunch of ideas in here

Some trades I made over the last week (As always, please do your own research before taking any positions. And constructive disagreement is welcome – I don’t expect anyone to agree with all of these moves):

Bought $ON (Friday) - I went back and forth on this one. But ultimately decided that at the current valuation (12.5x 2024 EPS, which is still well below what they earned in 2022/2023), the positives (Chinese EV ramps, plug-in hybrid SiC design wins, ADAS/machine vision image sensors, data center power semis, the Treo platform’s ramp, aerospace/defense, utility solar, a large U.S. manufacturing footprint, the analog cycle showing signs of turning) outweigh the negatives (China competition/politics, tariff-related headwinds, $TSLA’s share losses, the end of U.S. EV subsidies). Plus it has a high short interest for an analog semi and there hasn’t been much insider selling this year.

Bought $FOUR (Friday) - Had been eying it for a while, and finally talked myself into buying on Friday. Still have some concerns about the CEO change and softening restaurant spending. But also think the valuation (~15x 2026E EV/FCF) provides a margin of error for a long-time share-gainer that’s still seeing double-digit organic growth and has a strong M&A track record. Also, the RSI is down to 26, 18% of the float is shorted, Isaacman bought shares again in August and (for now, at least) wealth effects might give a boost to restaurant and entertainment spending.

Sold $SKYT (Friday) - I still like its positioning as U.S. manufacturer of defense/aerospace silicon. And as a manufacturer of components going into quantum computers, it might be the only public quantum computing play that turns a profit from the tech over the next few years :). But after a huge run-up (aided by short-squeezes and retail enthusiasm), the valuation feels full absent some very good news about orders or GM improvement. And there’s been a lot of insider selling over the last two months. Might re-enter if it sees a decent pullback.

Trimmed $IREN again (Wednesday-Friday) - This has been a great trade (and I do wish I’d waited longer to start trimming). But the current valuation prices in hyperscaler leasing deals for a good chunk of the 2.75GW in contracted power they have at their Sweetwater and Childress, TX locations, assuming pricing similar to what firms such as $CORZ and $GLXY have obtained. And I have mixed feelings about their internal GPU cloud business – it can work in the short-term due to GPU demand being ahead of supply and $NVDA's wish to become less dependent on tech giants developing ASICs, but it’s still not easy competing against AMZN/MSFT/GOOG and larger neoclouds such as $CRWV and $NBIS, and things could get messy if/when GPU supply surpasses demand. Throw in all the chasing that’s gone on from the kinds of retail investors who have been piling into stuff like $IONQ and $OKLO, and I felt this was a good time to cut exposure.

Shorted $KTOS and $PL (Friday) - While both firms have clear defense/space spending tailwinds, their valuations have reached nosebleed levels thanks to momentum-chasing, and each now has an RSI around 80. They seem ripe for a pullback if (as I think is quite possible) we see a rotation from overbought momentum stocks to other parts of the market. Also, given all the long exposure I have to defense/space tech plays, these positions act as hedges of sorts.

Shorted $JMIA (Tuesday) - A simple way to look at this: Following this year’s giant run-up, Jumia sports higher forward EV/sales and EV/GP multiples than $MELI or $SE, even though it’s growing slower than them and remains pretty unprofitable for now (Q2 op. loss of $16.5M on revenue of $45.6M). Plus it's far from certain they'll keep seeing double-digit grow next year (comps get much tougher) and only ~4% of the float is shorted.

Bought $EQT, $GPOR and $NFG (Wednesday-Friday) - I’m a tourist when it comes to natural gas plays, so take this FWIW, but I fel[...]

t this was a good time to add some exposure to the space. Valuations are low, institutional energy positioning is still relatively light, U.S. electricity demand and prices are shooting higher (and demand looks poised to keep growing fast over the next few years), and the industry has strong political support. I screened for names that have low P/Es, are expected to see strong 2025/2026 growth, aren’t too levered and have E&P and midstream assets close to data center hotspots such as Texas and Ohio. - Eric Jhonsa tweet

Umesh
Prompt on Veo 3 : a rhinoceros in pristine blue wireframe on deep black. Lines assemble, then it runs, accelerates into a charge. Camera snaps from low front push-in to overhead tilt, then swings past a leg-level tracking shot into a wide drift. Horn flares red, scanning forward; restrained blur; reset cleanly
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Umesh
Prompt on Midjourney : To protect others is to find yourself --chaos 50 --ar 16:9 --sref 4086667022 --sw 400 --stylize 600 https://t.co/04EYo09xNW
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