⁠Value Spotlight (Andrew Sather)
Calculating ROIC Contest (Tutorial):

$NFLX in <90 seconds https://t.co/078ojgywid
tweet

AkhenOsiris
@ConsensusGurus @Kalshi

Kalshi needs to hit the SPAC button quick

ROBINHOOD ROLLS OUT PRESIDENTIAL ELECTION BETTING CONTRACTS – WSJ

$HOOD is launching contracts that let users bet on the 2024 presidential election, following a federal court ruling that cleared the way for election betting in the U.S. Starting today, eligible customers can purchase contracts for candidates like Kamala Harris or Donald Trump, priced between $0.02 and $0.99. Correct predictions will pay out $1 per contract.

The move marks Robinhood’s first step into prediction markets, expanding access to its 24 million funded users through a partnership with Interactive Brokers' ForecastEx platform. - Wall St Engine
tweet

⁠Stock Analysis Compilation
Appalaches Capital on CME Group $CME US

Thesis: CME Group’s dominance in the futures market, coupled with significant competitive advantages, positions it well against emerging challengers like FMX, making it a high-quality, defensive investment.

(Extract from their Q3 letter) https://t.co/gs9eJVpF1Q
tweet

⁠Quiver Quantitative
Just saw that @elonmusk retweeted one of our old data visualizations today.

If anyone is interested:

Here's an update on election donations by employees of publicly traded companies https://t.co/4pCcONFZgL
tweet

⁠Dimitry Nakhla | Babylon Capital®
Cadence Design $CDNS Reports a Strong Q3 🎯

✅ Revenue: $1.22B vs $1.18B (est)

✅ Adjusted EPS: $1.64 vs $1.44 (est)

⬆️ Guidance

#stocks #investing https://t.co/3ymSzdkMc3

A sober valuation analysis on $CDNS 🧘🏽‍♂️

•NTM P/E Ratio: 37.49x
•5-Year Mean: 42.46x

•NTM FCF Yield: 2.10%
•5-Year Mean: 2.43%

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

Going forward, investors can receive ~12% MORE in earnings per share & ~13% LESS in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $1.23B
•Long-Term Debt: $1.00B

$CDNS has a strong balance sheet, a BBB+ S&P Credit Rating & 27x FFO Interest Coverage

RETURN ON CAPITAL✅
•2020: 20.0%
•2021: 22.0%
•2022: 29.5%
•2023: 30.3%
•LTM: 21.4%

RETURN ON EQUITY✅
•2020: 26.0%
•2021: 26.6%
•2022: 31.0%
•2023: 33.9%
•LTM: 29.4%

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

REVENUES✅
•2013: $1.46B
•2023: $4.09B
•CAGR: 10.85%

FREE CASH FLOW✅
•2013: $322.68M
•2023: $1.25B
•CAGR: 14.47%

NORMALIZED EPS✅
•2013: $0.86
•2023: $5.15
•CAGR: 19.59%

SHARE BUYBACKS🆗
•2018 Shares Outstanding: 281.14M
•LTM Shares Outstanding: 272.98M

By reducing its shares outstanding ~3%, $CDNS increased its EPS by ~3.1% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 88.5%
•LTM Operating Margins: 28.9%
•LTM Net Income Margins: 25.4%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~12% MORE in EPS & ~13% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $CDNS has to grow earnings at an 18.75% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be less than the (18.75%) required growth rate:

2024E: $5.89 (14.1% YoY) *FY Dec

2025E: $6.92 (17.4% YoY)
2026E: $8.28 (19.7% YoY)

$CDNS has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $CDNS ends 2026 with $8.28 in EPS & see its CAGR potential assuming different multiples:

37x P/E: $306.36💵 … ~9.5% CAGR

35x P/E: $289.80💵 … ~6.8% CAGR

33x P/E: $273.24💵 … ~3.9% CAGR

31x P/E: $256.68💵 … ~1.0% CAGR

While it’s certainly reasonable for $CDNS to trade for >37x, I wouldn’t want to rely on that assumption as it doesn’t leave us with a substantial margin of safety

However, something to keep in mind, 89% of $CDNS total revenue is recurring, while 11% comes from "up-front" sources, such as hardware and IP product deliveries

It's a VERY sticky business and a critical player at the forefront of the AI and Semiconductor revolution 🤖

So it’s one of those businesses that will likely always appear to be expensive with the occasional once-every-five-year type of drop leading to an attractive purchase price with substantial margin of safety

Today at $251💵 $CDNS appears to be fairly valued, perhaps worth a nibble

Considering my margin of safety requirements, I’d get more interested in $CDNS closer to $200💵 (20% below today’s price) where I can reasonably expect 12.10% CAGR while assuming a 31x multiple

#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®
tweet

⁠Stock Analysis Compilation
Patient Capital Management on Kosmos Energy $KOS US

Thesis: Kosmos Energy’s inflecting free cash flow, combined with undervaluation and strong reserves, presents a significant growth opportunity and potential acquisition appeal.

(Extract from their Q3 letter) https://t.co/jbsxMDjSRF
tweet

⁠Ahmad Jivraj
“Bitcoin represents an attempted hostile takeover of the world’s currency system.”

@PeterLBrandt

What an awesome quote
tweet

⁠Dimitry Nakhla | Babylon Capital®
~14 months ago I published the bull case for $PYPL on Benzinga

Perhaps my favorite part is where I suggested flipping “the script”

These narratives often highlight Mr. Market & his emotional craziness often driven by fear & greed

#stocks #investing
___

https://t.co/P8QYF9LbRP https://t.co/H2BJMOlXtC
tweet