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โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $TMO ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 23.68x
โข5-Year Mean: 24.92x
โขNTM FCF Yield: 4.09%
โข5-Year Mean: 3.59%
As you can see, $TMO appears to be trading near fair value
Going forward, investors can receive ~5% MORE in earnings per share & ~14% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $TMO is a great business
BALANCE SHEET๐
โขCash & Short-Term Inv: $6.65B
โขLong-Term Debt: $31.20B
$TMO has a good balance sheet (acquisitions a big growth driver), a A- S&P Credit Rating & 6x FFO Interest Coverage
RETURN ON CAPITALโ *
โข2019: 8.3%
โข2020: 13.4%
โข2021: 12.8%
โข2022: 10.3%
โข2023: 8.7%
โขLTM: 8.6%
*lower ROIC due to acquisition strategy
RETURN ON EQUITYโ
โข2019: 12.9%
โข2020: 19.9%
โข2021: 20.5%
โข2022: 16.4%
โข2023: 13.1%
โขLTM: 12.9%
$TMO has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $13.09B
โข2023: $42.86B
โขCAGR: 12.59%
FREE CASH FLOWโ
โข2013: $1.73B
โข2023: $6.93B
โขCAGR: 14.88%
NORMALIZED EPSโ
โข2013: $5.42
โข2023: $21.55
โขCAGR: 14.80%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 365.80M
โขLTM Shares Outstanding: 384.25M
MARGINSโ
โขLTM Gross Margins: 40.7%
โขLTM Operating Margins: 17.4%
โขLTM Net Income Margins: 14.5%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~5% MORE in EPS & ~14% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $TMO has to grow earnings at an 11.84% 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 (11.84%) required growth rate:
2024E: $21.70 (0.7% YoY) *FY Dec
2025E: $23.58 (8.7% YoY)
2026E: $26.37 (11.8% YoY)
$TMO has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $TMO ends 2026 with $26.37 in EPS & see its CAGR potential assuming different multiples
27x P/E: $711.99๐ต โฆ ~14.0% CAGR
26x P/E: $685.62๐ต โฆ ~12.0% CAGR
25x P/E: $659.25๐ต โฆ ~10.0% CAGR
24x P/E: $632.88๐ต โฆ ~7.9% CAGR
As you can see, $TMO appears to have attractive return potential IF we assume >26x earnings (a multiple above its 5-year mean & multiple that may be slightly demanding given its growth rate
However, $TMO is an excellent business with a wide moat & will benefit from future ongoing sector demand
Yet, those buying $TMO today at $541๐ต are buying it for a fair price, with little margin of safety
Iโd be more interested in $TMO closer to $500๐ต (8% below todayโs price) where I can reasonably expect ~11% to ~12% CAGR while assuming a 23x - 24x end multiple, ensuring a comfortable margin of safety
#stocks #investing
___
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 ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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A sober valuation analysis on $TMO ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 23.68x
โข5-Year Mean: 24.92x
โขNTM FCF Yield: 4.09%
โข5-Year Mean: 3.59%
As you can see, $TMO appears to be trading near fair value
Going forward, investors can receive ~5% MORE in earnings per share & ~14% MORE in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $TMO is a great business
BALANCE SHEET๐
โขCash & Short-Term Inv: $6.65B
โขLong-Term Debt: $31.20B
$TMO has a good balance sheet (acquisitions a big growth driver), a A- S&P Credit Rating & 6x FFO Interest Coverage
RETURN ON CAPITALโ *
โข2019: 8.3%
โข2020: 13.4%
โข2021: 12.8%
โข2022: 10.3%
โข2023: 8.7%
โขLTM: 8.6%
*lower ROIC due to acquisition strategy
RETURN ON EQUITYโ
โข2019: 12.9%
โข2020: 19.9%
โข2021: 20.5%
โข2022: 16.4%
โข2023: 13.1%
โขLTM: 12.9%
$TMO has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $13.09B
โข2023: $42.86B
โขCAGR: 12.59%
FREE CASH FLOWโ
โข2013: $1.73B
โข2023: $6.93B
โขCAGR: 14.88%
NORMALIZED EPSโ
โข2013: $5.42
โข2023: $21.55
โขCAGR: 14.80%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 365.80M
โขLTM Shares Outstanding: 384.25M
MARGINSโ
โขLTM Gross Margins: 40.7%
โขLTM Operating Margins: 17.4%
โขLTM Net Income Margins: 14.5%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~5% MORE in EPS & ~14% MORE in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $TMO has to grow earnings at an 11.84% 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 (11.84%) required growth rate:
2024E: $21.70 (0.7% YoY) *FY Dec
2025E: $23.58 (8.7% YoY)
2026E: $26.37 (11.8% YoY)
$TMO has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $TMO ends 2026 with $26.37 in EPS & see its CAGR potential assuming different multiples
27x P/E: $711.99๐ต โฆ ~14.0% CAGR
26x P/E: $685.62๐ต โฆ ~12.0% CAGR
25x P/E: $659.25๐ต โฆ ~10.0% CAGR
24x P/E: $632.88๐ต โฆ ~7.9% CAGR
As you can see, $TMO appears to have attractive return potential IF we assume >26x earnings (a multiple above its 5-year mean & multiple that may be slightly demanding given its growth rate
However, $TMO is an excellent business with a wide moat & will benefit from future ongoing sector demand
Yet, those buying $TMO today at $541๐ต are buying it for a fair price, with little margin of safety
Iโd be more interested in $TMO closer to $500๐ต (8% below todayโs price) where I can reasonably expect ~11% to ~12% CAGR while assuming a 23x - 24x end multiple, ensuring a comfortable margin of safety
#stocks #investing
___
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 ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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โ Quiver Quantitative
RT @InsiderRadar: $SMLR has risen over 6% this morning, and is now up 8% since an insider purchase was reported yesterday https://t.co/JbaCFvvUdr
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RT @InsiderRadar: $SMLR has risen over 6% this morning, and is now up 8% since an insider purchase was reported yesterday https://t.co/JbaCFvvUdr
๐จ JUST IN: New Insider Purchase
A director of $SMLR has reported the purchase of ~$1.9M of the company's stock.
The stock rose over 35% between when the trade was made (on 11/7) and when it was reported.
This is only the first insider purchase at the company in over a year. tweet
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โ Stock Analysis Compilation
Hedge funds' best ideas #18 is in your inbox ๐ฅ
(link below)
Includes links to the Q3 letters from Alta Fox / Aoris / Aristotle / Choice Equities CM / Clearbridge / Conestoga / Donville Kent / Greenlight / Greystone CM / Guinness GI / Harding Loevner / Massif Capital / Middle Coast Investing / Munro / Oakmark / Third Point / Tidefall Capital / Wedgewood Partners / White Brook Capital
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Hedge funds' best ideas #18 is in your inbox ๐ฅ
(link below)
Includes links to the Q3 letters from Alta Fox / Aoris / Aristotle / Choice Equities CM / Clearbridge / Conestoga / Donville Kent / Greenlight / Greystone CM / Guinness GI / Harding Loevner / Massif Capital / Middle Coast Investing / Munro / Oakmark / Third Point / Tidefall Capital / Wedgewood Partners / White Brook Capital
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โ Investing visuals
Spotify $SPOT delivery a strong Q3 and really turned on the cash printer lately. Here's everything you need to know๐ https://t.co/RPVPDm7ee3
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Spotify $SPOT delivery a strong Q3 and really turned on the cash printer lately. Here's everything you need to know๐ https://t.co/RPVPDm7ee3
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โ Hidden Value Gems
Should be an exciting reading on some of Buffettโs early investments. We are all keen to learn the method of generating 50% returns annually!
Thank you for writing this book, @brettgardner_10 ๐
cc @Investbythebook https://t.co/p2yFdlWHY0
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Should be an exciting reading on some of Buffettโs early investments. We are all keen to learn the method of generating 50% returns annually!
Thank you for writing this book, @brettgardner_10 ๐
cc @Investbythebook https://t.co/p2yFdlWHY0
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โ Investing visuals
Palantir $PLTR seems like an unstoppable rocket ship, hitting new all-time-highs๐
The marketโs now betting on 30% FCF growth for the next 10 years. Letโs see how it all plays out ๐คทโโ๏ธ https://t.co/y4aR3IJhN7
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Palantir $PLTR seems like an unstoppable rocket ship, hitting new all-time-highs๐
The marketโs now betting on 30% FCF growth for the next 10 years. Letโs see how it all plays out ๐คทโโ๏ธ https://t.co/y4aR3IJhN7
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โ Stock Analysis Compilation
Munro on Vertiv $VRT US
Thesis: Vertiv is set to double its earnings as AI-driven demand for advanced data centers surges, making it a critical partner for tech giants and hyperscalers worldwide.
(Extract from their Q3 letter) https://t.co/aFlYvY147V
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Munro on Vertiv $VRT US
Thesis: Vertiv is set to double its earnings as AI-driven demand for advanced data centers surges, making it a critical partner for tech giants and hyperscalers worldwide.
(Extract from their Q3 letter) https://t.co/aFlYvY147V
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