Offshore
Photo
โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $V ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 26.35x
โข10-Year Mean: 28.08x
โขNTM FCF Yield: 3.97%
โข10-Year Mean: 3.82%
As you can see, $V appears to be trading below fair value
Going forward, investors can receive ~6% MORE in earnings per share & ~4% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $V is a quality business
BALANCE SHEETโ
โขCash & Short-Term Inv: $20.13B
โขLong-Term Debt: $20.78B
$V has a great balance sheet, an AA- S&P Credit Rating, & 32x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2019: 27.5%
โข2020: 21.4%
โข2021: 24.2%
โข2022: 30.7%
โข2023: 33.7%
RETURN ON EQUITYโ
โข2019: 35.2%
โข2020: 30.7%
โข2021: 33.4%
โข2022: 40.9%
โข2023: 46.5%
$V has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $11.78B
โข2023: $32.65B
โขCAGR: 10.73%
FREE CASH FLOWโ
โข2013: $2.55B
โข2023: $19.70B
โขCAGR: 22.68%
NORMALIZED EPSโ
โข2013: $1.90
โข2023: $8.77
โขCAGR: 16.52%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 2.62B
โขLTM Shares Outstanding: 2.02B
By reducing its shares outstanding 23%, $V increased its EPS by 30% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 97.8%
โขLTM Operating Margins: 67.3%
โขLTM Net Income Margins: 53.0%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~6% MORE in EPS & ~4% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $V has to grow earnings at a 13.18% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be slightly less than the (13.18%) required growth rate:
2024E: $9.96 (13.6% YoY) *FY Sep
2025E: $11.19 (12.4% YoY)
2026E: $12.66 (13.1% YoY)
$V has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $V ends 2026 with $12.66 in EPS & see its CAGR potential assuming different multiples
29x P/E: $367.14๐ต โฆ ~14.6% CAGR
28x P/E: $354.48๐ต โฆ ~12.9% CAGR
27x P/E: $341.82๐ต โฆ ~11.2% CAGR
26x P/E: $329.16๐ต โฆ ~9.3% CAGR
As you can see, $V appears to have attractive return potential if we assume >27x earnings, a multiple near its 10-year mean & more importantly โ a multiple justified by its growth rate AND quality โ even assuming a 36x multiple, $V is still fairly attractive
I consider $V one of the best businesses in the world & as Warren Buffett says:
โItโs far better to buy a wonderful company at a fair price than a fair company at a wonderful priceโ
$V is even trading at a valuation slightly better than just a fair price
Today at $272.50๐ต $V appears to be a worthwhile consideration for investment
If I were adding shares of $V today, Iโd also leave some extra capital to accumulate even more shares closer to 24x (if it gets there) โ roughly 9% below todayโs price or at ~$248๐ต
#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 $V ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 26.35x
โข10-Year Mean: 28.08x
โขNTM FCF Yield: 3.97%
โข10-Year Mean: 3.82%
As you can see, $V appears to be trading below fair value
Going forward, investors can receive ~6% MORE in earnings per share & ~4% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $V is a quality business
BALANCE SHEETโ
โขCash & Short-Term Inv: $20.13B
โขLong-Term Debt: $20.78B
$V has a great balance sheet, an AA- S&P Credit Rating, & 32x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2019: 27.5%
โข2020: 21.4%
โข2021: 24.2%
โข2022: 30.7%
โข2023: 33.7%
RETURN ON EQUITYโ
โข2019: 35.2%
โข2020: 30.7%
โข2021: 33.4%
โข2022: 40.9%
โข2023: 46.5%
$V has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $11.78B
โข2023: $32.65B
โขCAGR: 10.73%
FREE CASH FLOWโ
โข2013: $2.55B
โข2023: $19.70B
โขCAGR: 22.68%
NORMALIZED EPSโ
โข2013: $1.90
โข2023: $8.77
โขCAGR: 16.52%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 2.62B
โขLTM Shares Outstanding: 2.02B
By reducing its shares outstanding 23%, $V increased its EPS by 30% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 97.8%
โขLTM Operating Margins: 67.3%
โขLTM Net Income Margins: 53.0%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~6% MORE in EPS & ~4% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $V has to grow earnings at a 13.18% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be slightly less than the (13.18%) required growth rate:
2024E: $9.96 (13.6% YoY) *FY Sep
2025E: $11.19 (12.4% YoY)
2026E: $12.66 (13.1% YoY)
$V has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $V ends 2026 with $12.66 in EPS & see its CAGR potential assuming different multiples
29x P/E: $367.14๐ต โฆ ~14.6% CAGR
28x P/E: $354.48๐ต โฆ ~12.9% CAGR
27x P/E: $341.82๐ต โฆ ~11.2% CAGR
26x P/E: $329.16๐ต โฆ ~9.3% CAGR
As you can see, $V appears to have attractive return potential if we assume >27x earnings, a multiple near its 10-year mean & more importantly โ a multiple justified by its growth rate AND quality โ even assuming a 36x multiple, $V is still fairly attractive
I consider $V one of the best businesses in the world & as Warren Buffett says:
โItโs far better to buy a wonderful company at a fair price than a fair company at a wonderful priceโ
$V is even trading at a valuation slightly better than just a fair price
Today at $272.50๐ต $V appears to be a worthwhile consideration for investment
If I were adding shares of $V today, Iโd also leave some extra capital to accumulate even more shares closer to 24x (if it gets there) โ roughly 9% below todayโs price or at ~$248๐ต
#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
Offshore
Photo
โ iinvested
1Q'24 Greenhaven Road Capital on $ALTG
To read the full letter follow the link:
https://t.co/HhAAZQRRKy https://t.co/VfnDANjyfT
tweet
1Q'24 Greenhaven Road Capital on $ALTG
To read the full letter follow the link:
https://t.co/HhAAZQRRKy https://t.co/VfnDANjyfT
tweet
Offshore
Photo
โ iinvested
Here is Voss Capital on $ALTG
https://t.co/HhAAZQRRKy https://t.co/8UnWtDhPXB
tweet
Here is Voss Capital on $ALTG
https://t.co/HhAAZQRRKy https://t.co/8UnWtDhPXB
1Q'24 Greenhaven Road Capital on $ALTG
To read the full letter follow the link:
https://t.co/HhAAZQRRKy https://t.co/VfnDANjyfT tweet
Offshore
Photo
โ iinvested
1Q'24 Alphyn Capital Management on $DSGR
More fund letters here:
https://t.co/HhAAZQSpA6 https://t.co/yRS1ewau6b
tweet
1Q'24 Alphyn Capital Management on $DSGR
More fund letters here:
https://t.co/HhAAZQSpA6 https://t.co/yRS1ewau6b
tweet
Offshore
Photo
โ Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: A sober valuation analysis on $ADBE ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 26.77x
โข10-Year Mean: 34.54x
โขNTM FCF Yield: 4.06%
โข10-Year Mean: 3.54%
As you can see, $ADBE appears to be trading below fair value
Going forward, investors can receive ~29% MORE in earnings per share & ~14% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $ADBE is a quality business
BALANCE SHEETโ
โขCash & Short-Term Inv: $6.82B
โขLong-Term Debt: $2.14B
$ADBE has a strong balance sheet, an A+ S&P Credit Rating, & 62.81x FFO Interest Coverage
RETURN ON CAPITALโ
โข2018: 21.0%
โข2019: 22.1%
โข2020: 23.6%
โข2021: 29.8%
โข2022: 32.6%
โข2023: 32.3%
RETURN ON EQUITYโ
โข2018: 29.1%
โข2019: 29.7%
โข2020: 44.2%
โข2021: 34.4%
โข2022: 33.0%
โข2023: 35.5%
$ADBE has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $4.06B
โข2023: $19.41B
โขCAGR: 16.93%
FREE CASH FLOWโ
โข2013: $963.33M
โข2023: $6.94B
โขCAGR: 21.83%
NORMALIZED EPSโ
โข2013: $1.34
โข2023: $16.07
โขCAGR: 28.20%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 513.48M
โขLTM Shares Outstanding: 458.10M
By reducing its shares outstanding ~10.7%, $ADBE increased its EPS by ~11.9% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 88.1%
โขLTM Operating Margins: 35.0%
โขLTM Net Income Margins: 24.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~29% MORE in EPS & ~14% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ADBE has to grow earnings at a 13.39% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be close to the (13.39%) required growth rate:
2024E: $18.02 (12.1% YoY) *FY Nov
2025E: $20.36 (13.0% YoY)
2026E: $23.46 (15.2% YoY)
$ADBE has a good track record of meeting analyst estimates ~2 years out, so letโs assume $ADBE ends 2026 with $23.46 in EPS & see its CAGR potential assuming different multiples
30x P/E: $703.80๐ต โฆ ~13.9% CAGR
29x P/E: $680.34๐ต โฆ ~12.5% CAGR
28x P/E: $656.88๐ต โฆ 11.1% CAGR
27x P/E: $633.42๐ต โฆ 9.6% CAGR
As you can see, IF $ADBE meets estimates, it has attractive return potential at 28x earnings โ a level of strong fundamental support over last 10 years
I believe $ADBE is attractively valued today at $492๐ต (after the recent sell-off) HOWEVER we must be aware of what we donโt know
Many investors have plenty to say when it comes to generative AI & $ADBE โ some argue it can be a tailwind while others argue it can be a competitive risk
Yet, nobody really knows what the future holds
What we do know is that there is more uncertainty surrounding $ADBE now & these potential risks could hamper its valuation
Therefore, to mitigate risk, I think itโs wise to piece in to $ADBE & allocate a smaller %
E.g. allocating ~3% in $ADBE at $492๐ต and leaving room to increase the position to ~4% - ~5% allocation if $ADBE trades for ~21x earnings ($390๐ต given todayโs estimates)
#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
RT @DimitryNakhla: A sober valuation analysis on $ADBE ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 26.77x
โข10-Year Mean: 34.54x
โขNTM FCF Yield: 4.06%
โข10-Year Mean: 3.54%
As you can see, $ADBE appears to be trading below fair value
Going forward, investors can receive ~29% MORE in earnings per share & ~14% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $ADBE is a quality business
BALANCE SHEETโ
โขCash & Short-Term Inv: $6.82B
โขLong-Term Debt: $2.14B
$ADBE has a strong balance sheet, an A+ S&P Credit Rating, & 62.81x FFO Interest Coverage
RETURN ON CAPITALโ
โข2018: 21.0%
โข2019: 22.1%
โข2020: 23.6%
โข2021: 29.8%
โข2022: 32.6%
โข2023: 32.3%
RETURN ON EQUITYโ
โข2018: 29.1%
โข2019: 29.7%
โข2020: 44.2%
โข2021: 34.4%
โข2022: 33.0%
โข2023: 35.5%
$ADBE has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $4.06B
โข2023: $19.41B
โขCAGR: 16.93%
FREE CASH FLOWโ
โข2013: $963.33M
โข2023: $6.94B
โขCAGR: 21.83%
NORMALIZED EPSโ
โข2013: $1.34
โข2023: $16.07
โขCAGR: 28.20%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 513.48M
โขLTM Shares Outstanding: 458.10M
By reducing its shares outstanding ~10.7%, $ADBE increased its EPS by ~11.9% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 88.1%
โขLTM Operating Margins: 35.0%
โขLTM Net Income Margins: 24.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~29% MORE in EPS & ~14% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ADBE has to grow earnings at a 13.39% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be close to the (13.39%) required growth rate:
2024E: $18.02 (12.1% YoY) *FY Nov
2025E: $20.36 (13.0% YoY)
2026E: $23.46 (15.2% YoY)
$ADBE has a good track record of meeting analyst estimates ~2 years out, so letโs assume $ADBE ends 2026 with $23.46 in EPS & see its CAGR potential assuming different multiples
30x P/E: $703.80๐ต โฆ ~13.9% CAGR
29x P/E: $680.34๐ต โฆ ~12.5% CAGR
28x P/E: $656.88๐ต โฆ 11.1% CAGR
27x P/E: $633.42๐ต โฆ 9.6% CAGR
As you can see, IF $ADBE meets estimates, it has attractive return potential at 28x earnings โ a level of strong fundamental support over last 10 years
I believe $ADBE is attractively valued today at $492๐ต (after the recent sell-off) HOWEVER we must be aware of what we donโt know
Many investors have plenty to say when it comes to generative AI & $ADBE โ some argue it can be a tailwind while others argue it can be a competitive risk
Yet, nobody really knows what the future holds
What we do know is that there is more uncertainty surrounding $ADBE now & these potential risks could hamper its valuation
Therefore, to mitigate risk, I think itโs wise to piece in to $ADBE & allocate a smaller %
E.g. allocating ~3% in $ADBE at $492๐ต and leaving room to increase the position to ~4% - ~5% allocation if $ADBE trades for ~21x earnings ($390๐ต given todayโs estimates)
#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