⁠Dimitry Nakhla | Babylon Capital®
$BKNG stock finally reached my $4,300 price target & bounced +4% 💸

While this is nice in the short-term, I’d much prefer $BKNG to trade in my accumulation range a bit longer so I can continue adding to the position

As I stated a couple months ago:

“I’d consider $BKNG a great purchase closer to $4300 (~18.50x multiple) roughly 7% below today’s share price or closer to 21x NTM estimates

This is where I can reasonably expect ~10.50% CAGR assuming a more conservative 20x 2027 earnings estimates, ensuring a substantial margin of safety & leaving room for potential multiple expansion”

A quality valuation analysis on $BKNG 🧘🏽‍♂️

•NTM P/E Ratio: 22.76x
•3-Year Mean: 20.52x

•NTM FCF Yield: 5.35%
•3-Year Mean: 5.17%

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

Going forward, investors can receive ~10% LESS in earnings per share & ~3% MORE in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $15.78B
•Long-Term Debt: $13.79B

$BKNG has a great balance sheet, an A- S&P Credit Rating, & 9x FFO Interest Coverage Ratio

RETURN ON CAPITAL✅
•2019: 33.3%
•2020: 2.7%
•2021: 14.2%
•2022: 29.1%
•2023: 47.3%
•LTM: 48.8%

$BKNG has strong ROIC, highlighting the financial efficiency of the business

REVENUES✅
•2014: $8.44B
•2024E: $23.43B
•CAGR: 10.74%

FREE CASH FLOW✅
•2014: $2.78B
•2024: $7.52B
•CAGR: 10.46%

NORMALIZED EPS✅
•2014: $53.31
•2024E: $182.76
•CAGR: 13.11%

SHARE BUYBACKS✅
•2014 Shares Outstanding: 53.02M
•LTM Shares Outstanding: 34.51M

By reducing its shares outstanding 35%, $BKNG increased its EPS by 54% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 84.7%
•LTM Operating Margins: 28.7%
•LTM Net Income Margins: 21.8%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~10% LESS in EPS & ~3% MORE in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $BKNG has to grow earnings at an 11.38% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be more than (11.38%) required growth rate:

2024E: $182.76 (20.1% YoY) *FY Dec

2025E: $208.88 (14.3% YoY)
2026E: $241.36 (15.6% YoY)
2027E: $282.17 (16.9% YoY)

$BKNG has a decent track record of meeting analyst estimates ~2 years out, but let’s assume $BKNG ends 2027 with $238.17 in EPS & see its CAGR potential assuming different multiples

23x P/E: $6489💵 … ~13.0% CAGR

22x P/E: $6207💵 … ~11.3% CAGR

21x P/E: $5925💵 … ~9.6% CAGR

20x P/E: $5643💵 … ~7.8% CAGR

19x P/E: $5361💵 … ~6.0% CAGR

As you can see, $BKNG appears to have attractive return potential if we assume >22x earnings, a valuation above allowing for slight multiple compression, yet one that’s below its 3-year mean

Additionally, $BKNG EPS growth rate ( >12%) more than justifies a >22x multiple

Today at $4620💵 $BKNG appears to be a decent consideration for investment & fairly valued

I’d consider $BKNG a great purchase closer to $4300 (~18.50x multiple) roughly 7% below today’s share price or closer to 21x NTM estimates

This is where I can reasonably expect ~10.50% CAGR assuming a more conservative 20x 2027 earnings estimates, ensuring a substantial margin of safety & leaving room for potential multiple expansion

#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

⁠The Investing for Beginners Podcast
FCF Math: Operating Cash Flow - Capital Expenditures = Free Cash Flow.

Simple, yet powerful!
tweet

⁠The Investing for Beginners Podcast
4 Ratios every investor should know:

Want to find quality companies?

Try these profitability ratios.

Let's dive in 🧵⬇️ https://t.co/KThGhCuXkA
tweet

⁠Stock Analysis Compilation
Langdon Canadian Smaller Companies on Westaim $WED CN

Thesis: Westaim’s strategic transformation, backed by CC Capital and an insurance-led asset model, positions it for strong value creation.

(Extract from their Q4 letter) https://t.co/fkOo51XZFn
tweet

⁠Finding Compounders
Interesting story of the phone call between Steve Jobs and Warren Buffett

This is sourced from my free newsletter which you can subscribe to

Link in bio https://t.co/WuV03IYtPe
tweet

⁠App Economy Insights
📊 This Week in Visuals:

🎨 Adobe $ADBE
✍️ DocuSign $DOCU
🔐 Zscaler $ZS
🏗️ Procore $PCOR
🤖 UiPath $PATH
🔷 Rubrik $RBRK
and more!
https://t.co/9DSvpboEwJ
tweet

⁠The Kobeissi Letter
This is truly insane:

DOGE's spending cuts are ramping up so quickly that United Airlines announced government travel is down a MASSIVE -50%.

US airline stocks have now erased over -$20 BILLION of market cap over the last 4 weeks.

What is happening here?

(a thread) https://t.co/0WUqLkTCcL
tweet

⁠The Investing for Beginners Podcast
I've analyzed 100s of companies

Here's a list of resources I use:

1. IR (Investor Relations) Page
2. Company 10-k
3. Quartr app for quarterly/conference calls
4. Finchat for financials and ratios
5. Glassdoor
6. Executive bios in 10k/IR page
7. Youtube/Podcast interviews of C Suite
8. Proxy Statement
9. Customer reviews of product/service
10. Valuation on Finchat
11. Company writeups from others (Substack, SA, Fool)

What do you use?
tweet