⁠Hidden Value Gems
Quote of the day #95

#investing https://t.co/CVj4qy4qDK
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⁠Librarian Capital
$HAYPP snus sales permit in Sweden revoked (Wed)

"Social Welfare Department of the City of Stockholm ... decided to revoke Snusbolaget’s sales permit for tobacco products, including snus"

Snus sales in Sweden were ~20% of group sales
Haypp will appeal https://t.co/ji9kUQDYLS
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⁠Stock Analysis Compilation
Orbis on Koito $7276 JP

Thesis: Koito, a global leader in automotive lighting, offers long-term growth potential through technological leadership and strong market share, despite short-term headwinds in auto production

(Extract from their Q2 letter) https://t.co/JRoFVnHoUd
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⁠Librarian Capital
Reminder: Nicotine in cigarettes is not blamed directly for serious diseases, but for making cigarettes addictive so that smokers are exposed to other chemicals and combustion in cigarettes, which are blamed directly for serious diseases

This is why $PM's IQOS reduces harm

@evantindell The FDA agrees

"While nicotine is what addicts and keeps people using tobacco products, it is not what makes tobacco use so deadly ... This mix of chemicals—not nicotine—is what causes serious disease and death in tobacco users"

https://t.co/zBXjR5NjJm https://t.co/g3e7OHKv0O - Librarian Capital
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⁠Librarian Capital
Diageo $DEO AGM trading update

"Expectations are unchanged"
"Global environment remains challenging"
"Good progress on our strategic initiatives, including our US route-to-market enhancement"
"Growth will return"

$DGE +4.5% https://t.co/GwhVMBVVnJ
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⁠Librarian Capital
US Spirits: IWSR data shows declines continue (25-Sep)

Total Beverage Alcohol volume fell 2.8% in Jan-Jul 2024
RTD +2%, Beer -3.5%, Spirits -3%, Wine -4%
Tequila -1%, American Whiskey -2%

(TBA volume fell 2.6% in 2023)

$DGE $DEO $BF.B $RI $RCO $FEVR https://t.co/052JHgD1cE
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⁠Stock Analysis Compilation
Harris Associates on Airbus $AIR FP

Thesis: Airbus, benefiting from strong market share growth and a full order book through 2030, offers an attractive investment with potential for enhanced profitability

(Extract from their Q2 letter) https://t.co/Emceu6cYsA
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⁠Dimitry Nakhla | Babylon Capital®
TWO days ago I suggested $MEDP becomes an interesting consideration at $330💵 (~9.5% below that day’s price)

Yesterday shares of $MEDP fell ~10%, reaching my target ✅

As I stated in the most recent analysis:

“As you can see, $MEDP appears to have attractive return potential if we assume >30x earnings, a valuation that may not be justified by its growth rate & one that’s subject to multiple compression if the growth rate slows (which is expected for 2025-2026 vs 2018-2023)

Today at $365.70💵 $MEDP appears to be a “hold”

I’d consider $MEDP closer to $330💵(~26.70x NTM EPS), or roughly 9.5% below today’s share price”
_______

Stay tuned for today’s updated valuation analysis on $MEDP 📝

#stocks #investing

A sober valuation analysis on $MEDP 🧘🏽‍♂️

•NTM P/E Ratio: 29.52x
•5-Year Mean: 30.15x

•NTM FCF Yield: 3.91%
•5-Year Mean: 3.98%

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

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

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $510.89M
•Long-Term Debt: $0

$MEDP has a great balance sheet & 3.51x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2019: 16.0%
•2020: 17.6%
•2021: 18.0%
•2022: 46.8%
•2023: 46.4%
•LTM: 41.5%

RETURN ON EQUITY✅
•2019: 15.3%
•2020: 19.0%
•2021: 20.7%
•2022: 36.6%
•2023: 59.8%
•LTM: 58.9%

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

REVENUES✅
•2018: $704.59M
•2023: $1.88B
•CAGR: 21.76%

FREE CASH FLOW✅
•2018: $140.56M
•2023: $502.80M
•CAGR: 29.0%

NORMALIZED EPS✅
•2018: $2.81
•2023: $8.92
•CAGR: 25.98%

SHARE BUYBACKS✅
•2018 Shares Outstanding: 36.91M
•LTM Shares Outstanding: 31.93M

By reducing its shares outstanding 13.5%, $MEDP increased its EPS by 15.6% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 66.9%
•LTM Operating Margins: 18.8%
•LTM Net Income Margins: 16.7%

***NOW TO VALUATION 🧠

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

Using Benjamin Graham’s 2G rule of thumb, $MEDP has to grow earnings at a 14.76% 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 (14.76%) required growth rate:

2024E: $11.83 (32.5% YoY) *FY Dec
2025E: $13.42 (13.5% YoY)
2026E: $15.43 (15.0% YoY)

$MEDP has a great track record of meeting analyst estimates ~2 years out, so let’s assume $MEDP ends 2026 with $15.43 in EPS & see its CAGR potential assuming different multiples

30x P/E: $462.90💵 … ~10.9% CAGR

29x P/E: $447.47💵 … ~9.3% CAGR

28x P/E: $432.04💵 … ~7.6% CAGR

27x P/E: $416.61💵 … ~5.9% CAGR

As you can see, $MEDP appears to have attractive return potential if we assume >30x earnings, a valuation that may not be justified by its growth rate & one that’s subject to multiple compression if the growth rate slows (which is expected for 2025-2026 vs 2018-2023)

Today at $365.70💵 $MEDP appears to be a “hold”

I’d consider $MEDP closer to $330💵(~26.70x NTM EPS), or roughly 9.5% below today’s share price

This is where I can reasonably expect ~11% CAGR assuming a more conservative 27x 2026 earnings estimates

#stocks #investing
___

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. - Dimitry Nakhla | Babylon Capital®
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