⁠Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $MA 🧘🏽‍♂️

•NTM P/E Ratio: 30.52x
•10-Year Mean: 31.29x

•NTM FCF Yield: 3.32%
•10-Year Mean: 3.42%

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

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

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

BALANCE SHEET✅
•Cash & Short Term Inv: $7.66B
•Long-Term Debt: $13.54B

$MA has a strong balance sheet, an A+ S&P Credit Rating & 19.79x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 62.9%
•2020: 40.6%
•2021: 45.7%
•2022: 58.5%
•2023: 61.1%
•LTM: 64.1%

RETURN ON EQUITY✅
•2019: 141.4%
•2020: 102.5%
•2021: 124.7%
•2022: 144.0%
•2023: 167.4%
•LTM: 186.3%

$MA has excellent return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2013: $8.31B
•2023: $25.10B
•CAGR: 11.68%

FREE CASH FLOW✅
•2013: $3.98B
•2023: $11.61B
•CAGR: 11.30%

NORMALIZED EPS✅
•2013: $2.61
•2023: $12.26
•CAGR: 16.73%

PAID DIVIDENDS✅
•2013: $0.29
•2023: $2.37
•CAGR: 23.37%

SHARE BUYBACKS✅
•2013 Shares Outstanding: 1.21B
•LTM Shares Outstanding: 939M

By reducing its shares outstanding ~22.4%, $MA increased its EPS by ~28.8% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 100.0%
•LTM Operating Margins: 58.1%
•LTM Net Income Margins: 46.1%

***NOW TO VALUATION 🧠

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

Using Benjamin Graham’s 2G rule of thumb, $MA has to grow earnings at a 15.26% 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 more than the (15.26%) required growth rate:

2024E: $14.27 (16.4% YoY) *FY Dec
2025E: $16.58 (16.2% YoY)
2026E: $19.34 (16.6% YoY)

$MA has a good track record of meeting analyst estimates ~2 years out, but let’s assume $MA ends 2026 with $19.34 in EPS & see its CAGR potential assuming different multiples

31x P/E: $599.54💵 … ~12.8% CAGR

29.5x P/E: $570.53💵 … ~10.6% CAGR

28x P/E: $541.52💵 … ~8.4% CAGR

As you can see, $MA appears to have attractive return potential if we assume greater or equal to 29.5x earnings (slightly below the 10-year mean & justified given its quality & growth rate)

While there isn’t a great margin of safety today, $MA is such a high-quality business & has the potential to compound in the mid teens for the next 5 years & companies with strong & consistent earnings growth tend to look cheap years later (even if we thought they were “expensive” or even better, fairly valued at the time)

Today at $449💵 $MA appears to be a worthwhile consideration for investment

#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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⁠Dimitry Nakhla | Babylon Capital®
10 Investment & Stock Market Quotes 📝💭

1. “Investing is a business of probabilities, not certainties.” -Benjamin Graham

2. “The biggest risk is not taking any risk.” -Mark Zuckerberg

3. “The best time to buy is when there's blood in the streets.” -Baron Rothschild

4. “Price is what you pay. Value is what you get.” -Warren Buffett

5. “Invest for the long haul. It's the best way to tame the market's volatility.” -Peter Lynch

6. “The stock market is a device for transferring money from the impatient to the patient.” -Warren Buffett

7. “The four most dangerous words in investing are: 'This time it's different.'” -Sir John Templeton

8. “If you can't bear the thought of losing 50% of your portfolio, then you shouldn't be in the stock market.” -Mohnish Pabrai

9. “The most important thing is to understand what you're investing in and why.” -Nick Sleep

10. “Investing is not about being brilliant, it's about being consistent.” -Unknown

#stocks #investing
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⁠Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: 5 Quality Stocks On My Buy Radar Today 💸

💳 Visa $V
•NTM P/E: 26.30x
•5-Year Avg: 30.23x
•Estimated EPS Growth 2025: 12.4%
•Estimated EPS Growth 2026: 13.1%
•LTM ROIC: 34.7%
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🚛 Old Dominion Freight Lines $ODFL
•NTM P/E: 27.67x
•5-Year Avg: 28.75x
•Estimated EPS Growth 2025: 18.5%
•Estimated EPS Growth 2026: 10.6%
•LTM ROIC: 33.9%
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🖱️ Alphabet $GOOG $GOOGL
•NTM P/E: 22.63x
•5-Year Avg: 24.60x
•Estimated EPS Growth 2025: 13.7%
•Estimated EPS Growth 2026: 14.9%
•LTM ROIC: 30.2%
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📈 S&P Global $SPGI
•NTM P/E: 30.65x
•5-Year Avg: 29.14x
•Estimated EPS Growth 2025: 13.2%
•Estimated EPS Growth 2026: 13.1%
•LTM ROIC: 9.0%
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🧃 Monster Beverage $MNST
•NTM P/E: 28.54x
•5-Year Avg: 32.28x
•Estimated EPS Growth 2025: 14.2%
•Estimated EPS Growth 2026: 13.4%
•LTM ROIC: 24.0%
___

#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 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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⁠Dimitry Nakhla | Babylon Capital®
This is what happens when you pay a ludicrous 50x earnings for a business that does not meet growth estimates 📉

$NKE down nearly -60% from its highs ‼️

Multiples, relative to growth estimates, matter 🎯

#stocks #investing https://t.co/slqst29rL4
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AkhenOsiris
Keybanc on Semis/$NVDA

Traditional server demand is witnessing a meaningful recovery, particularly driven by major U.S. cloud providers like Meta and Microsoft as well as sustained demand from Chinese cloud service providers “and moderately improving demand within Enterprise."

“For 2024, we’re increasing our total server shipment estimates to +7% vs. +4% prior, with Enterprise +5% and Cloud +8%,"

“We continue to expect AI servers to grow 150% to ~450K in 2024”

In terms of Nvidia’s GB200, KeyBanc believes that most of the demand in 2025 will be for the NVL72 configuration rather than the NVL36. The firm notes that the NVL72's performance is 20-30 times greater than the H100 and offers the lowest cost per token solution available. As a result, they expect GB200 to generate over $200 billion in data center revenues for Nvidia in 2025.

NVDA price target rsised from $130 to $180.
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AkhenOsiris
$MSFT $AMZN

Jefferies cloud spend survey:

Survey of 40 U.S. CIOs reveals a growing focus on cloud adoption and a slight preference for Azure.

A "big jump in spend intentions" is a key takeaway, according to Jefferies. Significantly more CIOs (43%) expect cloud spending to increase by over 10% in 2024 compared to 2023 (28%).

This trend aligns with a decisive shift towards cloud workloads. The survey found that 58% of CIOs anticipate having more than half of their workloads in the cloud by the end of 2025, up from 36% currently.

Jefferies highlights a potential driver for this growth: Artificial Intelligence (AI). "AI is a material driver of increased cloud spend," the firm states, with 54% of respondents citing AI initiatives as a major reason for their rising cloud expenditures.

The survey results also suggest a shift in cloud provider preference. While both AWS and Azure remain dominant, Microsoft's offering appears to be gaining traction.

Jefferies reports, "MSFT Azure edged out AMZN AWS in this period's survey sample." Currently, 45% of respondents identify Azure as their primary cloud provider, compared to 43% for AWS.

This marks a reversal from Jefferies' December 2023 survey, where AWS held the lead.

Looking ahead, Jefferies says spending intentions favor Azure slightly, with cloud spend intentions slightly higher for Azure than AWS.

While acknowledging the ongoing importance of cost optimization, Jefferies views the survey results positively for cloud vendors as it "indicates that the bulk of revenue headwinds to Cloud vendors may be behind."
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AkhenOsiris
$AMD

Keybanc's Vinh said he still expects AMD to ship 500,000 of its MI300X AI chips this year, generating $6.2 billion in revenue. That compares with the company’s public forecast that AI chip revenue will total around $4 billion.
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⁠Dimitry Nakhla | Babylon Capital®
$BMY currently trades for a 17.32% FCF Yield, doubling its 10-year average FCF Yield of 8.46%

Is $BMY a value trap or is it undervalued?

I will share my thoughts on $BMY once the poll is complete 👇🏽

#stocks #investing
- Value Trap 📉
- Undervalued 📈
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AkhenOsiris
Bezos just fucking with all of us

The War of AMZN $200
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AkhenOsiris
Blow-off top #56
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⁠Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: Monster Beverage $MNST has posted ANNUAL sales GROWTH since 2003 💸

#stocks #investing https://t.co/1Is08tdXmM
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⁠Dimitry Nakhla | Babylon Capital®
Attention investors ‼️ — I am SURE this post will sharpen your investing mindset and skills. Take a couple minutes to read it in full - it'll be a game-changer for your investment journey.

Yesterday I shared a poll asking if you thought $BMY was undervalued or a value trap, given its 17.32% FCF Yield.

Before I share my opinion, I believe it’s CRITICAL to emphasize the importance of being selective when building a portfolio.

Imagine you were the manager of a fútbol club (in this case Liverpool FC 😉) and you have to choose your Starting XI.

Would you add $BMY? .. More on this later.

You can see my Starting XI in the photo below.

It’s a club of exceptional businesses that have wide moats, pristine balance sheets, excellent returns on invested capital and quality revenues & earnings.

$BMY on the other hand doesn’t really fit in this club as it fails to meet these standards.

Another way to demonstrate this is if you were building a fútbol club & you could choose ANY footballer, I’m sure your club may look something like this:

Cristiano Ronaldo, Lionel Messi, Kylian Mbappe, Vinicius Jr, Jude Bellingham, Alison Becker, Virgil Van Dyke, David Alaba, Kyle Walker, Trent Alexander Arnold, & Ilkay Gundogan.

INVESTING IS NO DIFFERENT.

You have the opportunity to build a SUPERTEAM of quality businesses & nobody is forcing you to buy “subpar players” for your club.

As Warren Buffett even said:

“I could improve your ultimate financial welfare by giving you a ticket with only 20 slots in it so that you had 20 punches—representing all the investments that you got to make in a lifetime.”

The mistake MANY investors make is NOT being SELECTIVE enough.

Why add a subpar player to your squad when you could buy Ronaldo?

You’ll become a better investor and enhance your financial welfare by focusing on buying the world’s BEST & MOST QUALITY business when they trade at a fair or better valuation. This should be your focus.

Do not let the daily noise of the market sway you into buying a subpar company just because it trades for a low multiple.

So this brings us to $BMY.

Although $BMY may “appear” undervalued due to its low multiple & high FCF Yield, it could be a value trap and does not belong in my “superteam” of companies.

In short, it lacks many of the qualities I mentioned for the other businesses & has a poor history of performance.

Just have a look at the long-term growth of $BMY Revenues, EPS, & Balance Sheet and you’ll be very unimpressed.

Sure, $BMY may “have moments of excellence” (as any footballer may have in the occasional game) with nice rallies off its lows, but this doesn’t make $BMY a consistent performer for my club.

Yes, it’s important to consider the future when investing (which isn’t even bright for $BMY at the moment). However, it doesn’t mean we should forget about the poor performances $BMY has had over the last 15 years.

I wouldn’t want to count on a player who’s been performing poorly over 15 seasons and hope that this player will finally show me moments of consistent brilliance for the next 5 seasons.

Also, we should to be wise and consider the opportunity cost of owning subpar businesses over excellent businesses over the years.

I am sure there are many investors who have owned $BMY for the last ~5 years in hopes that $BMY would eventually see it supposed “value” realized.

Meanwhile, the same investors would have been better off, owning more shares of companies like $V $MA $GOOG $META $ASML $LRCX $NVDA $MSFT $CRM $VRTX $TMO $AAPL etc.

This was my Achilles Heel when I first started my investment journey in 2016. I was TOO focused on valuation & lower multiples rather than QUALITY & growth at a reasonable price.

So when you’re building your club[...]

of equities, don’t buy a bench player in place of Lionel Messi or Cristiano Ronaldo. You’d just be downgrading your team & winning less.

If you made it this far, hope this helped!

Feel free to share your starting XI 😉

#stocks #investing"

$BMY currently trades for a 17.32% FCF Yield, doubling its 10-year average FCF Yield of 8.46%

Is $BMY a value trap or is it undervalued?

I will share my thoughts on $BMY once the poll is complete 👇🏽

#stocks #investing
- Value Trap 📉
- Undervalued 📈 "- Dimitry Nakhla | Babylon Capital®
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