Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
3 months ago I stated:
โGiven its quality, moat, predictability, & growth rate, I am comfortable relying on 28x - 30x multiple, making $INTU a good purchase today at $560๐ตโ
Since then, $INTU shares gained +29%โ
You can see more of the analysis attached below
๐๐ฝ https://t.co/oUMFU7TR6y
A quality valuation analysis on $INTU ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 28.74x
โข10-Year Mean: 33.55x
โขNTM FCF Yield: 3.60%
โข10-Year Mean: 3.68%
As you can see, $INTU appears to be trading somewhere below fair value & near fair value
Going forward, investors can receive ~16% MORE in earnings per share & ~2% LESS in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $INTU is a good business
BALANCE SHEETโ
โขCash & Short-Term Inv: $3.36B
โขLong-Term Debt: $5.63B
$INTU has a strong balance sheet, an A- S&P Credit Rating & 22x FFO Interest Coverage
RETURN ON CAPITALโ
โข2019: 43.9%
โข2020: 25.2%
โข2021: 19.7%
โข2022: 10.7%
โข2023: 13.1%
โข2024: 15.4%
RETURN ON EQUITYโ
โข2019: 47.4%
โข2020: 41.2%
โข2021: 27.5%
โข2022: 15.7%
โข2023: 14.1%
โข2024: 16.6%
$INTU has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $4.24B
โข2024: $16.29B
โขCAGR: 14.40%
FREE CASH FLOWโ
โข2014: $1.34B
โข2024: $4.69B
โขCAGR: 13.34%
NORMALIZED EPSโ
โข2014: $3.49
โข2024: $16.94
โขCAGR: 17.11%
PAID DIVIDENDSโ
โข2014: $0.76
โข2024: $3.60
โขCAGR: 16.82%
SHARE BUYBACKS๐
โข2014 Shares Outstanding: 291.00M
โขLTM Shares Outstanding: 284.00M
By reducing its shares outstanding ~2.4%, $INTU increased its EPS by ~2.5% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 79.6%
โขLTM Operating Margins: 23.1%
โขLTM Net Income Margins: 17.6%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~16% MORE in EPS & ~2% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $INTU has to grow earnings at a 14.37% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly less than the (14.37%) required growth rate:
2025E: $19.32 (14.1% YoY) *FY Jul
2026E: $22.13 (14.5% YoY)
2027E: $25.09 (13.4% YoY)
$INTU has a great track record of meeting analyst estimates ~2 years out, but letโs assume $INTU ends 2027 with $25.09 in EPS & see its CAGR potential assuming different multiples:
32x P/E: $802.88๐ต โฆ ~16.1% CAGR
31x P/E: $777.79๐ต โฆ ~14.6% CAGR
30x P/E: $752.70๐ต โฆ ~13.0% CAGR
29x P/E: $727.61๐ต โฆ ~11.5% CAGR
28x P/E: $702.52๐ต โฆ ~10.0% CAGR
While itโs certainly reasonable for $INTU to trade for 32x, I wouldnโt want to rely on that assumption as it doesnโt leave us with a substantial margin of safety
Yet, given its quality, moat, predictability, & growth rate, I am comfortable relying on 28x - 30x multiple, making $INTU a good purchase today at $560๐ต
I consider $INTU a strong purchase with a substantial margin of safety closer to $525๐ต, or ~27.60x NTM earnings (~7% below todays price)
Given todayโs estimates, at $525๐ต I can reasonably expect ~10% CAGR while assuming an attractive & conservative 26x multiple
___
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 ๐ฌ๐ข๐ญ๐ฎ[...]
3 months ago I stated:
โGiven its quality, moat, predictability, & growth rate, I am comfortable relying on 28x - 30x multiple, making $INTU a good purchase today at $560๐ตโ
Since then, $INTU shares gained +29%โ
You can see more of the analysis attached below
๐๐ฝ https://t.co/oUMFU7TR6y
A quality valuation analysis on $INTU ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 28.74x
โข10-Year Mean: 33.55x
โขNTM FCF Yield: 3.60%
โข10-Year Mean: 3.68%
As you can see, $INTU appears to be trading somewhere below fair value & near fair value
Going forward, investors can receive ~16% MORE in earnings per share & ~2% LESS in FCF per share ๐ง ***
Before we get into valuation, letโs take a look at why $INTU is a good business
BALANCE SHEETโ
โขCash & Short-Term Inv: $3.36B
โขLong-Term Debt: $5.63B
$INTU has a strong balance sheet, an A- S&P Credit Rating & 22x FFO Interest Coverage
RETURN ON CAPITALโ
โข2019: 43.9%
โข2020: 25.2%
โข2021: 19.7%
โข2022: 10.7%
โข2023: 13.1%
โข2024: 15.4%
RETURN ON EQUITYโ
โข2019: 47.4%
โข2020: 41.2%
โข2021: 27.5%
โข2022: 15.7%
โข2023: 14.1%
โข2024: 16.6%
$INTU has strong return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2014: $4.24B
โข2024: $16.29B
โขCAGR: 14.40%
FREE CASH FLOWโ
โข2014: $1.34B
โข2024: $4.69B
โขCAGR: 13.34%
NORMALIZED EPSโ
โข2014: $3.49
โข2024: $16.94
โขCAGR: 17.11%
PAID DIVIDENDSโ
โข2014: $0.76
โข2024: $3.60
โขCAGR: 16.82%
SHARE BUYBACKS๐
โข2014 Shares Outstanding: 291.00M
โขLTM Shares Outstanding: 284.00M
By reducing its shares outstanding ~2.4%, $INTU increased its EPS by ~2.5% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 79.6%
โขLTM Operating Margins: 23.1%
โขLTM Net Income Margins: 17.6%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~16% MORE in EPS & ~2% LESS in FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $INTU has to grow earnings at a 14.37% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be slightly less than the (14.37%) required growth rate:
2025E: $19.32 (14.1% YoY) *FY Jul
2026E: $22.13 (14.5% YoY)
2027E: $25.09 (13.4% YoY)
$INTU has a great track record of meeting analyst estimates ~2 years out, but letโs assume $INTU ends 2027 with $25.09 in EPS & see its CAGR potential assuming different multiples:
32x P/E: $802.88๐ต โฆ ~16.1% CAGR
31x P/E: $777.79๐ต โฆ ~14.6% CAGR
30x P/E: $752.70๐ต โฆ ~13.0% CAGR
29x P/E: $727.61๐ต โฆ ~11.5% CAGR
28x P/E: $702.52๐ต โฆ ~10.0% CAGR
While itโs certainly reasonable for $INTU to trade for 32x, I wouldnโt want to rely on that assumption as it doesnโt leave us with a substantial margin of safety
Yet, given its quality, moat, predictability, & growth rate, I am comfortable relying on 28x - 30x multiple, making $INTU a good purchase today at $560๐ต
I consider $INTU a strong purchase with a substantial margin of safety closer to $525๐ต, or ~27.60x NTM earnings (~7% below todays price)
Given todayโs estimates, at $525๐ต I can reasonably expect ~10% CAGR while assuming an attractive & conservative 26x multiple
___
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 ๐ฌ๐ข๐ญ๐ฎ[...]
Offshore
โ Dimitry Nakhla | Babylon Capitalยฎ 3 months ago I stated: โGiven its quality, moat, predictability, & growth rate, I am comfortable relying on 28x - 30x multiple, making $INTU a good purchase today at $560๐ตโ Since then, $INTU shares gained +29%โ
You canโฆ
๐๐ญ๐ข๐จ๐ง. 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. - Dimitry Nakhla | Babylon Capitalยฎ tweet
๐๐ง๐๐จ๐ซ๐ฆ๐๐ญ๐ข๐จ๐ง ๐๐จ๐ง๐ญ๐๐ข๐ง๐๐ ๐ข๐ง ๐ญ๐ก๐ข๐ฌ ๐ญ๐ฐ๐๐๐ญ ๐ก๐๐ฌ ๐๐๐๐ง ๐จ๐๐ญ๐๐ข๐ง๐๐ ๐๐ซ๐จ๐ฆ ๐ฌ๐จ๐ฎ๐ซ๐๐๐ฌ ๐๐๐ฅ๐ข๐๐ฏ๐๐ ๐ญ๐จ ๐๐ ๐ซ๐๐ฅ๐ข๐๐๐ฅ๐, ๐๐ฎ๐ญ ๐ข๐ฌ ๐ง๐จ๐ญ ๐ ๐ฎ๐๐ซ๐๐ง๐ญ๐๐๐ ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ. - Dimitry Nakhla | Babylon Capitalยฎ tweet
โ Wall St Engine
TRUMP TO SIGN ORDERS TO BOOST NUCLEAR POWER FRIDAY
Facing rising energy demand from AI, Trump is set to sign executive orders easing regulations for new nuclear reactors and invoking the Defense Production Act to cut reliance on Russia and China for fuel. Orders will also push loan support and fast-track siting.
tweet
TRUMP TO SIGN ORDERS TO BOOST NUCLEAR POWER FRIDAY
Facing rising energy demand from AI, Trump is set to sign executive orders easing regulations for new nuclear reactors and invoking the Defense Production Act to cut reliance on Russia and China for fuel. Orders will also push loan support and fast-track siting.
tweet
Offshore
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โ Investing visuals
$GOOGL: everything you need to know, visualized:
โข How they make money
โข Sentiment
โข Revenue by geography
โข Business segments
โข Revenue & FCF growth
โข Youtube revenue
โข Margins
โข Balance sheet
โข Valuation
โข One-pager summary
A thread ๐งต๐ https://t.co/Fnr00qo8QY
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$GOOGL: everything you need to know, visualized:
โข How they make money
โข Sentiment
โข Revenue by geography
โข Business segments
โข Revenue & FCF growth
โข Youtube revenue
โข Margins
โข Balance sheet
โข Valuation
โข One-pager summary
A thread ๐งต๐ https://t.co/Fnr00qo8QY
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โ Wall St Engine
$AAPL TO EXPAND INDIA SUPPLY CHAIN WITH $1.5B FOXCONN PLANT โ FT
Foxconn is investing $1.5B in a new display module plant near Chennai, India, to support Appleโs supply chain shift away from China. The move comes despite pressure from Trump to bring iPhone manufacturing back to the U.S. Plant expected to create ~14,000 jobs.
tweet
$AAPL TO EXPAND INDIA SUPPLY CHAIN WITH $1.5B FOXCONN PLANT โ FT
Foxconn is investing $1.5B in a new display module plant near Chennai, India, to support Appleโs supply chain shift away from China. The move comes despite pressure from Trump to bring iPhone manufacturing back to the U.S. Plant expected to create ~14,000 jobs.
tweet
Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: $INTU is proof that โexpensive stocksโ can be a bargain in disguise ๐
10-Years ago $INTU traded for 35.72x & today it trades for 31.86x NTM EPS ๐ต
Meanwhile, the company delivered a 22.3% 10-year CAGR, translating to a remarkable 637% total return ๐
This is why the price you pay (valuation) for a company isnโt necessarily everything ๐ญ
What primarily matters is choosing the right companies to invest in because even if you pay a premium for a company with strong growth potential, it can end up looking like a bargain years later if the company delivers strong & consistent earnings growth ๐ธ
tweet
RT @DimitryNakhla: $INTU is proof that โexpensive stocksโ can be a bargain in disguise ๐
10-Years ago $INTU traded for 35.72x & today it trades for 31.86x NTM EPS ๐ต
Meanwhile, the company delivered a 22.3% 10-year CAGR, translating to a remarkable 637% total return ๐
This is why the price you pay (valuation) for a company isnโt necessarily everything ๐ญ
What primarily matters is choosing the right companies to invest in because even if you pay a premium for a company with strong growth potential, it can end up looking like a bargain years later if the company delivers strong & consistent earnings growth ๐ธ
tweet
Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
A quality valuation analysis on $CRM ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 25.38x
โข3-Year Mean: 28.15x
โขNTM FCF Yield: 4.93%
โข3-Year Mean: 4.39%
As you can see, $CRM appears to be trading below fair value
Going forward, investors can expect to receive ~11% MORE in earnings per share & ~12% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $CRM is a good business
BALANCE SHEETโ
โขCash & Equivalents: $14.03B
โขLong-Term Debt: $8.43B
$CRM has an excellent balance sheet, an A+ S&P Credit Rating & 43x FFO Interest Coverage Ratio
RETURN ON CAPITAL๐
โข2021: 0.9%
โข2022: 0.8%
โข2023: 2.5%
โข2024: 8.2%
โข2025: 10.2%
RETURN ON EQUITY๐
โข2021: 10.8%
โข2022: 2.9%
โข2023: 0.4%
โข2024: 7.0%
โข2025: 10.3%
$CRM return metrics are ok, although more recently trending in the right direction
REVENUESโ
โข2020: $17.10B
โข2025: $37.90B
โขCAGR: 17.25%
FREE CASH FLOWโ
โข2020: $3.69B
โข2025: $12.43B
โขCAGR: 27.49%
$CRM FCF Margins expanded from 21.6% to 32.8% from 2020-2025 ๐ฅ
NORMALIZED EPSโ
โข2020: $2.99
โข2025: $10.20
โขCAGR: 27.81%
SHARE BUYBACKSโ
โข2020 Shares Outstanding: 850M
โขLTM Shares Outstanding: 974M
By increasing its shares outstanding ~14.5%, $CRM diluted its EPS by ~13% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 77.2%
โขLTM Operating Margins: 20.2%
โขLTM Net Income Margins: 16.4%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~11% MORE in EPS & ~12% MORE FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $CRM has to grow earnings at a 12.69% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2026 - 2028 EPS growth over the next few years to be near the (12.69%) required growth rate:
2026E: $11.17 (9.5% YoY) *FY Jan
2027E: $12.54 (12.2% YoY)
2028E: $14.58 (16.3% YoY)
$CRM has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $CRM ends 2028 with $14.58 in EPS & see its CAGR potential assuming different multiples
27x P/E: $393.66๐ต โฆ ~14.4% CAGR
26x P/E: $379.08๐ต โฆ ~12.8% CAGR
25x P/E: $364.50๐ต โฆ ~11.2% CAGR
24x P/E: $349.92๐ต โฆ ~9.5% CAGR
As you can see, weโd have to assume >25x earnings for $CRM to have double digit CAGR potential (a multiple justified by its growth rate, predictability, & moat)
Today at $278๐ต $CRM appears to be worthwhile consideration for investment especially when you assess the trajectory of the companyโs FCF & Net Income margins (steadily trending higher with room to expand)
To ensure some margin of safety, if thereโs further weakness, it could be wise to piece into the position, for example:
Initiating ~50% of the position at ~$283๐ต & adding a second tranche at ~$230๐ต or at ~20x NTM earnings
At $230๐ต I consider $CRM a strong consideration with a substantial margin of safety
___
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 ๏ฟฝ[...]
A quality valuation analysis on $CRM ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 25.38x
โข3-Year Mean: 28.15x
โขNTM FCF Yield: 4.93%
โข3-Year Mean: 4.39%
As you can see, $CRM appears to be trading below fair value
Going forward, investors can expect to receive ~11% MORE in earnings per share & ~12% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $CRM is a good business
BALANCE SHEETโ
โขCash & Equivalents: $14.03B
โขLong-Term Debt: $8.43B
$CRM has an excellent balance sheet, an A+ S&P Credit Rating & 43x FFO Interest Coverage Ratio
RETURN ON CAPITAL๐
โข2021: 0.9%
โข2022: 0.8%
โข2023: 2.5%
โข2024: 8.2%
โข2025: 10.2%
RETURN ON EQUITY๐
โข2021: 10.8%
โข2022: 2.9%
โข2023: 0.4%
โข2024: 7.0%
โข2025: 10.3%
$CRM return metrics are ok, although more recently trending in the right direction
REVENUESโ
โข2020: $17.10B
โข2025: $37.90B
โขCAGR: 17.25%
FREE CASH FLOWโ
โข2020: $3.69B
โข2025: $12.43B
โขCAGR: 27.49%
$CRM FCF Margins expanded from 21.6% to 32.8% from 2020-2025 ๐ฅ
NORMALIZED EPSโ
โข2020: $2.99
โข2025: $10.20
โขCAGR: 27.81%
SHARE BUYBACKSโ
โข2020 Shares Outstanding: 850M
โขLTM Shares Outstanding: 974M
By increasing its shares outstanding ~14.5%, $CRM diluted its EPS by ~13% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 77.2%
โขLTM Operating Margins: 20.2%
โขLTM Net Income Margins: 16.4%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~11% MORE in EPS & ~12% MORE FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $CRM has to grow earnings at a 12.69% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2026 - 2028 EPS growth over the next few years to be near the (12.69%) required growth rate:
2026E: $11.17 (9.5% YoY) *FY Jan
2027E: $12.54 (12.2% YoY)
2028E: $14.58 (16.3% YoY)
$CRM has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $CRM ends 2028 with $14.58 in EPS & see its CAGR potential assuming different multiples
27x P/E: $393.66๐ต โฆ ~14.4% CAGR
26x P/E: $379.08๐ต โฆ ~12.8% CAGR
25x P/E: $364.50๐ต โฆ ~11.2% CAGR
24x P/E: $349.92๐ต โฆ ~9.5% CAGR
As you can see, weโd have to assume >25x earnings for $CRM to have double digit CAGR potential (a multiple justified by its growth rate, predictability, & moat)
Today at $278๐ต $CRM appears to be worthwhile consideration for investment especially when you assess the trajectory of the companyโs FCF & Net Income margins (steadily trending higher with room to expand)
To ensure some margin of safety, if thereโs further weakness, it could be wise to piece into the position, for example:
Initiating ~50% of the position at ~$283๐ต & adding a second tranche at ~$230๐ต or at ~20x NTM earnings
At $230๐ต I consider $CRM a strong consideration with a substantial margin of safety
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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 ๏ฟฝ[...]