⁠Dimitry Nakhla | Babylon Capital®
6 Undervalued Quality Stocks With Double-Digit CAGR Potential | LTM ROIC 💵

🖨️ ASML Holding $ASML
•CAGR estimate using 27x: 12.6%
•LTM ROIC: 37.2%

🖱️ Alphabet $GOOG $GOOGL
•CAGR estimate using 21x: 12.4%
•LTM ROIC: 30.9%

📦 Amazon $AMZN (P/OCF*)
•CAGR estimate using 16x*: 18.0%
•LTM ROIC: 13.8%

💸 PayPal $PYPL
•CAGR estimate using 19x: 12.2%
•LTM ROIC: 15.8%

📀 Applied Materials $AMAT
•CAGR estimate using 21x: 12.0%
•LTM ROIC: 30.5%

💳 Visa $V
•CAGR estimate using 28x: 10.8%
•LTM ROIC: 35.7%

#stocks #investing

*Period ending FY 2026
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⁠Value Spotlight (Andrew Sather)
Tutorial: Calculate Invested Capital the "Popular" Way (the financing approach)

$COST https://t.co/52g5EUgJBn
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⁠Stock Analysis Compilation
Stock Analysis Compilation #60 is in your inbox 🔥
(link below)

39 free analyses from the best hedge funds & newsletters :
$AMZN $ACIC $APP $CELH $CURB $EXPE $HIMS $ICAD $IBKR $MKTX $MBIN $PEP $PETS $SOC $SEG $SPOT $LRN $TCS $MTN $VOXX and many more https://t.co/5Y4i87oD6t
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⁠App Economy Insights
$ASML just had its worst day in 26 years! 📉

ASML builds the world’s most advanced chipmaking equipment.

What happened?
Did this create an entry point?
Here's why you might want to look closer.
https://t.co/lZayzeWgwM
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⁠Investing visuals
You can only pick one for the next 10 years: Netflix $NFLX or Spotify $SPOT? 👇

Comment 🍿 for $NFLX
Comment 🎵 for $SPOT https://t.co/czj9HRREHD
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⁠Quiver Quantitative
Look at this.

Last month, we posted this report on a stock trade by a US Representative that caught our eye.

The stock has now risen 38% since the trade.

It's up another 5% today: https://t.co/fzLNXtOWJq
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⁠Stock Analysis Compilation
Montaka on Spotify $SPOT

Thesis: Spotify is focused on expanding revenue streams with a new premium tier and increased investment in AI-driven personalization, aiming to enhance profitability and user experience

(Extract from their article, link to the full analysis in SAC#60) https://t.co/gvXIiLgtZo
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⁠Dimitry Nakhla | Babylon Capital®
To ensure accuracy, here are the most recent & updated $ASML Normalized EPS estimates attached below 👇🏽

Keep in mind that in yesterday’s post I assumed $30.00 in 2026 EPS, still below current estimates 🧮

#stocks #investing https://t.co/ew0Wq8Z4oG

A sober valuation analysis on $ASML 🧘🏽‍♂️

•NTM P/E Ratio: 23.90x
•10-Year Mean: 31.07x

As you can see, $ASML appears to be trading below fair value

Going forward, investors can receive ~30% MORE in earnings per share 🧠***

Before we get into valuation, let’s take a look at why $ASML is an excellent business (*Financials in USD*)

BALANCE SHEET✅
•Cash & Short Term Inv: $5.56B
•Long-Term Debt: $5.23B

$ASML has a strong balance sheet & 31x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 17.5%
•2020: 21.6%
•2021: 43.8%
•2022: 48.0%
•2023: 48.7%
•LTM: 38.0%

RETURN ON EQUITY✅
•2019: 21.4%
•2020: 26.9%
•2021: 49.0%
•2022: 59.4%
•2023: 70.4%
•LTM: 49.2%

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

REVENUES✅
•2013: $7.22B
•2023: $30.42B
•CAGR: 15.46%

FREE CASH FLOW*
• $ASML FCF is very sporadic due to heavy capital expenditures & isn’t necessarily the most reliable way to analyze the company’s value

NORMALIZED EPS✅
•2013: $3.17
•2023: $21.65
•CAGR: 21.18%

SHARE BUYBACKS✅
•2018 Shares Outstanding: $426.40M
•LTM Shares Outstanding: 393.80M

By reducing its shares outstanding ~7.6%, $ASML increased its EPS by ~8.2% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 51.1%
•LTM Operating Margins: 30.7%
•LTM Net Income Margins: 26.4%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~30% MORE in EPS

Using Benjamin Graham’s 2G rule of thumb, $ASML has to grow earnings at an 11.95% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be more than the (11.95%) required growth rate:

2024E: $20.21 (-6.4% YoY) *FY Dec

2025E: $30.14 (49.1% YoY)
2026E: $35.47 (17.7% YoY)

$ASML has a decent track record of meeting analyst estimates ~2 years out. HOWEVER, let’s be conservative & assume $ASML ends 2026 with $30.00*** in EPS (16.5% below current estimates) & see its CAGR potential assuming different multiples

30x P/E: $900💵 … ~14.2% CAGR

29x P/E: $870💵 … ~12.4% CAGR

28x P/E: $840💵 … ~10.7% CAGR

27x P/E: $810💵 … ~8.9% CAGR

26x P/E: $780💵 … ~7.1% CAGR

As you can see, $ASML appears to have attractive return potential EVEN if we assume greater or equal to 28x EPS (below its 10-year mean & justified given its quality, moat & growth rate) while also assuming 2026 EPS is 16.5% below today’s estimates

Today at $683💵 $ASML appears to be a great consideration for investment, although it will come with extreme volatility

Additionally, we have some margin of safety by relying on a lower multiple, lower growth rate, & by purchasing shares near what I like to call a “fundamental bottom” (as you’ll see in the first photo)

As I’ve stated before, given its volatility, however, it’s wise to piece into $ASML — this way, you enhance your margin of safety while also positioning yourself to “win-win” if the stock moves up or down in the short-term 💵

#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. - Dimitry Nakhla | Babylon Capital®
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