Offshore
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โ Hidden Value Gems
RT @TheIdeaFarm: 10 Stats from Research by Michael Mauboussin (@mjmauboussin)
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RT @TheIdeaFarm: 10 Stats from Research by Michael Mauboussin (@mjmauboussin)
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Offshore
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โ Librarian Capital
Home Depot $HD FY24Q2
Q2 comp sales -3.3% y/y, incl. US -3.6%
Total sales +0.6% (* w/ SRS acquisition)
Adj. EBIT flattish with margin -20 bps to 15.3%
Adj. EPS also flattish
Updates FY24 guidance*
52-wk Comp sales down 3-4% (was down 1%)
53-wk Adj. EPS down 1-3% (was up 1%) https://t.co/GiLL8cf8tA
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Home Depot $HD FY24Q2
Q2 comp sales -3.3% y/y, incl. US -3.6%
Total sales +0.6% (* w/ SRS acquisition)
Adj. EBIT flattish with margin -20 bps to 15.3%
Adj. EPS also flattish
Updates FY24 guidance*
52-wk Comp sales down 3-4% (was down 1%)
53-wk Adj. EPS down 1-3% (was up 1%) https://t.co/GiLL8cf8tA
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Offshore
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โ Hidden Value Gems
In case you are thinking of buying $NVDA today. It can still deliver, but the chances are slimโฆ
h/t @TheIdeaFarm based on @mjmauboussin research https://t.co/dcpdQcqxQq
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In case you are thinking of buying $NVDA today. It can still deliver, but the chances are slimโฆ
h/t @TheIdeaFarm based on @mjmauboussin research https://t.co/dcpdQcqxQq
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Offshore
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โ Librarian Capital
Great read: "Abyss: The Cuban Missile Crisis" (Max Hastings)
Highly relevant with Ukraine war (which motivated the book) and possible Taiwan conflict
Another lesson is poor info, incompetence and bad actors are key factors even in great affairs of state
https://t.co/8NZ3YIaaEa https://t.co/MeOoMORUWx
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Great read: "Abyss: The Cuban Missile Crisis" (Max Hastings)
Highly relevant with Ukraine war (which motivated the book) and possible Taiwan conflict
Another lesson is poor info, incompetence and bad actors are key factors even in great affairs of state
https://t.co/8NZ3YIaaEa https://t.co/MeOoMORUWx
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Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $ULTA ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 12.20x
โข5-Year Mean: 21.99x
โขNTM FCF Yield: 7.62%
โข5-Year Mean: 4.50%
As you can see, $ULTA appears to be trading below fair value
Going forward, investors can receive ~80% MORE in earnings per share & ~69% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $ULTA is a good business
BALANCE SHEETโ
โขCash & Short-Term Inv: $524.60M
โขLong-Term Debt: $0
$ULTA has an excellent balance sheet
RETURN ON CAPITALโ
โข2020: 22.9%
โข2021: 8.9%
โข2022: 37.9%
โข2023: 41.8%
โข2024: 39.2%
RETURN ON EQUITYโ
โข2020: 37.9%
โข2021: 9.0%
โข2022: 55.8%
โข2023: 71.1%
โข2024: 60.9%
$ULTA has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2019: $6.72
โข2024: $11.21B
โขCAGR: 10.77%
FREE CASH FLOWโ
โข2014: $636.73M
โข2024: $1.04B
โขCAGR: 10.33%
NORMALIZED EPSโ
โข2019: $10.94
โข2024: $26.03
โขCAGR: 18.92%
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 64.46M
โขLTM Shares Outstanding: 49.07M
By reducing its shares outstanding ~23.8%, $ULTA increased its EPS by ~31.3% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 42.7%
โขLTM Operating Margins: 14.5%
โขLTM Net Income Margins: 11.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~80% MORE in EPS & ~69% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ULTA has to grow earnings at an 6.10% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over next few years to be at the (6.10%) required growth rate:
2025E: $25.68 (-1.3% YoY) *FY Jan
2026E: $28.19 (9.8% YoY)
2027E: $31.12 (10.4% YoY)
$ULTA has a good track record of meeting analyst estimates ~2 years out, so letโs assume $ULTA ends 2027 with $31.12 in EPS & see its CAGR potential assuming different multiples
17x P/E: $529.04๐ต โฆ ~22.3% CAGR
16x P/E: $497.92๐ต โฆ ~19.4% CAGR
15x P/E: $466.80๐ต โฆ ~16.3% CAGR
14x P/E: $435.68๐ต โฆ ~13.1% CAGR
13x P/E: $404.56๐ต โฆ ~9.8% CAGR
As you can see, $ULTA appears to have attractive return potential if we assume it trades 14x earnings (a reasonable assumption)
However, the ๐ here is that $ULTA multiple needs to expand from the current NTM P/E of 12.20x
$ULTA growth rate slowed down significantly, however share buybacks (especially at current levels) can be very accretive & lead to some EPS growth
Multiples can compress when growth expectations arenโt met, & multiples can expand when growth expectations are exceeded, among other things
$ULTA will likely trade at a higher multiple IF growth returns โ this is the leap of faith investors would need to take to invest in $ULTA
Given its record, return metrics, exceptional balance sheet, & strong consumer loyalty (42M members in loyalty program & over 95% of sales funnel through its loyalty program), I believe the odds are in $ULTA favor
Today at $320๐ต $ULTA appears to be a good consideration for investment* (*not a โforever buy & holdโ)
#stocks #investing
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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 ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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A sober valuation analysis on $ULTA ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 12.20x
โข5-Year Mean: 21.99x
โขNTM FCF Yield: 7.62%
โข5-Year Mean: 4.50%
As you can see, $ULTA appears to be trading below fair value
Going forward, investors can receive ~80% MORE in earnings per share & ~69% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $ULTA is a good business
BALANCE SHEETโ
โขCash & Short-Term Inv: $524.60M
โขLong-Term Debt: $0
$ULTA has an excellent balance sheet
RETURN ON CAPITALโ
โข2020: 22.9%
โข2021: 8.9%
โข2022: 37.9%
โข2023: 41.8%
โข2024: 39.2%
RETURN ON EQUITYโ
โข2020: 37.9%
โข2021: 9.0%
โข2022: 55.8%
โข2023: 71.1%
โข2024: 60.9%
$ULTA has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2019: $6.72
โข2024: $11.21B
โขCAGR: 10.77%
FREE CASH FLOWโ
โข2014: $636.73M
โข2024: $1.04B
โขCAGR: 10.33%
NORMALIZED EPSโ
โข2019: $10.94
โข2024: $26.03
โขCAGR: 18.92%
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 64.46M
โขLTM Shares Outstanding: 49.07M
By reducing its shares outstanding ~23.8%, $ULTA increased its EPS by ~31.3% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 42.7%
โขLTM Operating Margins: 14.5%
โขLTM Net Income Margins: 11.1%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~80% MORE in EPS & ~69% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ULTA has to grow earnings at an 6.10% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over next few years to be at the (6.10%) required growth rate:
2025E: $25.68 (-1.3% YoY) *FY Jan
2026E: $28.19 (9.8% YoY)
2027E: $31.12 (10.4% YoY)
$ULTA has a good track record of meeting analyst estimates ~2 years out, so letโs assume $ULTA ends 2027 with $31.12 in EPS & see its CAGR potential assuming different multiples
17x P/E: $529.04๐ต โฆ ~22.3% CAGR
16x P/E: $497.92๐ต โฆ ~19.4% CAGR
15x P/E: $466.80๐ต โฆ ~16.3% CAGR
14x P/E: $435.68๐ต โฆ ~13.1% CAGR
13x P/E: $404.56๐ต โฆ ~9.8% CAGR
As you can see, $ULTA appears to have attractive return potential if we assume it trades 14x earnings (a reasonable assumption)
However, the ๐ here is that $ULTA multiple needs to expand from the current NTM P/E of 12.20x
$ULTA growth rate slowed down significantly, however share buybacks (especially at current levels) can be very accretive & lead to some EPS growth
Multiples can compress when growth expectations arenโt met, & multiples can expand when growth expectations are exceeded, among other things
$ULTA will likely trade at a higher multiple IF growth returns โ this is the leap of faith investors would need to take to invest in $ULTA
Given its record, return metrics, exceptional balance sheet, & strong consumer loyalty (42M members in loyalty program & over 95% of sales funnel through its loyalty program), I believe the odds are in $ULTA favor
Today at $320๐ต $ULTA appears to be a good consideration for investment* (*not a โforever buy & holdโ)
#stocks #investing
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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 ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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