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โ Dimitry Nakhla | Babylon Capitalยฎ
~3 weeks ago I shared my โsober valuation analysis ๐ง๐ฝโโ๏ธโ on $ACN stating:
โAs you can see, weโd have to assume >25x earnings for $ACN to have double digit CAGR potential (a multiple slightly above its 10-year average & above whatโs arguably justified given its growth rate)
Today at $306๐ต it appears that $ACN is a wonderful company trading at a fair price
Iโd reconsider $ACN closer to $285๐ต or at ~22.78x forward estimates (~7% below todayโs price) where I can possibly expect near double digit return potential assuming a 23x end multiple in 2026โ
Since then, $ACN dropped ~7% & is currently trading at $285๐ต as my research suggested
Tomorrow I will share an updated analysis on $ACN ๐ฏ
#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."
A sober valuation analysis on $ACN ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 24.50x
โข10-Year Mean: 23.98x
โขNTM FCF Yield: 5.42%
โข10-Year Mean: 5.20%
As you can see, $ACN appears to be trading near fair value
Going forward, investors can expect to receive ~2% LESS in earnings per share & ~4% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $ACN is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $5.12B
โขLong-Term Debt: $71.64M
$ACN has an excellent balance sheet, an AA- S&P Credit Rating & 174x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2018: 54.2%
โข2019: 42.1%
โข2020: 30.8%
โข2021: 32.0%
โข2022: 38.2%
โข2023: 33.8%
RETURN ON EQUITYโ
โข2018: 41.2%
โข2019: 37.9%
โข2020: 32.1%
โข2021: 31.9%
โข2022: 32.6%
โข2023: 28.5%
$ACN has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $28.56B
โข2023: $64.11B
โขCAGR: 8.42%
FREE CASH FLOWโ
โข2013: $2.93B
โข2023: $8.99B
โขCAGR: 11.86%
NORMALIZED EPSโ
โข2013: $4.21
โข2023: $11.67
โขCAGR: 10.73%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 713.34M
โขLTM Shares Outstanding: 637.95M
By reducing its shares outstanding ~10.5%, $ACN increased its EPS by ~11.7% (assuming 0 growth)
PAID DIVIDENDSโ
โข2013: $1.62
โข2023: $4.48
โขCAGR: 10.70%
MARGINSโ
โขLTM Gross Margins: 32.6%
โขLTM Operating Margins: 15.8%
โขLTM Net Income Margins: 10.9%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~2% LESS in EPS & ~4% MORE FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ACN has to grow earnings at a 12.25% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be less than the (12.25%) required growth rate:
2024E: $12.17 (4.3% YoY) *FY August
2025E: $13.20 (8.5% YoY)
2026E: $14.83 (12.4% YoY)
$ACN has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $ACN ends 2026 with $14.83 in EPS & see its CAGR potential assuming different m[...]
~3 weeks ago I shared my โsober valuation analysis ๐ง๐ฝโโ๏ธโ on $ACN stating:
โAs you can see, weโd have to assume >25x earnings for $ACN to have double digit CAGR potential (a multiple slightly above its 10-year average & above whatโs arguably justified given its growth rate)
Today at $306๐ต it appears that $ACN is a wonderful company trading at a fair price
Iโd reconsider $ACN closer to $285๐ต or at ~22.78x forward estimates (~7% below todayโs price) where I can possibly expect near double digit return potential assuming a 23x end multiple in 2026โ
Since then, $ACN dropped ~7% & is currently trading at $285๐ต as my research suggested
Tomorrow I will share an updated analysis on $ACN ๐ฏ
#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."
A sober valuation analysis on $ACN ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 24.50x
โข10-Year Mean: 23.98x
โขNTM FCF Yield: 5.42%
โข10-Year Mean: 5.20%
As you can see, $ACN appears to be trading near fair value
Going forward, investors can expect to receive ~2% LESS in earnings per share & ~4% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $ACN is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $5.12B
โขLong-Term Debt: $71.64M
$ACN has an excellent balance sheet, an AA- S&P Credit Rating & 174x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2018: 54.2%
โข2019: 42.1%
โข2020: 30.8%
โข2021: 32.0%
โข2022: 38.2%
โข2023: 33.8%
RETURN ON EQUITYโ
โข2018: 41.2%
โข2019: 37.9%
โข2020: 32.1%
โข2021: 31.9%
โข2022: 32.6%
โข2023: 28.5%
$ACN has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $28.56B
โข2023: $64.11B
โขCAGR: 8.42%
FREE CASH FLOWโ
โข2013: $2.93B
โข2023: $8.99B
โขCAGR: 11.86%
NORMALIZED EPSโ
โข2013: $4.21
โข2023: $11.67
โขCAGR: 10.73%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 713.34M
โขLTM Shares Outstanding: 637.95M
By reducing its shares outstanding ~10.5%, $ACN increased its EPS by ~11.7% (assuming 0 growth)
PAID DIVIDENDSโ
โข2013: $1.62
โข2023: $4.48
โขCAGR: 10.70%
MARGINSโ
โขLTM Gross Margins: 32.6%
โขLTM Operating Margins: 15.8%
โขLTM Net Income Margins: 10.9%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~2% LESS in EPS & ~4% MORE FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ACN has to grow earnings at a 12.25% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be less than the (12.25%) required growth rate:
2024E: $12.17 (4.3% YoY) *FY August
2025E: $13.20 (8.5% YoY)
2026E: $14.83 (12.4% YoY)
$ACN has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $ACN ends 2026 with $14.83 in EPS & see its CAGR potential assuming different m[...]
Offshore
โ Dimitry Nakhla | Babylon Capitalยฎ ~3 weeks ago I shared my โsober valuation analysis ๐ง๐ฝโโ๏ธโ on $ACN stating: โAs you can see, weโd have to assume >25x earnings for $ACN to have double digit CAGR potential (a multiple slightly above its 10-year average &โฆ
ultiples
25x P/E: $370.75๐ต โฆ ~10.3% CAGR
24x P/E: $355.92๐ต โฆ ~8.4% CAGR
23x P/E: $341.09๐ต โฆ ~6.5% CAGR
22x P/E: $326.26๐ต โฆ ~4.5% CAGR
As you can see, weโd have to assume >25x earnings for $ACN to have double digit CAGR potential (a multiple slightly above its 10-year average & above whatโs arguably justified given its growth rate)
Today at $306๐ต it appears that $ACN is a wonderful company trading at a fair price
Iโd reconsider $ACN closer to $285๐ต or at ~22.78x forward estimates (~7% below todayโs price) where I can possibly expect near double digit return potential assuming a 23x end multiple in 2026
#stocks #investing
Thank you @WisedelCapital for the request
___
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. "- Dimitry Nakhla | Babylon Capitalยฎ
tweet
25x P/E: $370.75๐ต โฆ ~10.3% CAGR
24x P/E: $355.92๐ต โฆ ~8.4% CAGR
23x P/E: $341.09๐ต โฆ ~6.5% CAGR
22x P/E: $326.26๐ต โฆ ~4.5% CAGR
As you can see, weโd have to assume >25x earnings for $ACN to have double digit CAGR potential (a multiple slightly above its 10-year average & above whatโs arguably justified given its growth rate)
Today at $306๐ต it appears that $ACN is a wonderful company trading at a fair price
Iโd reconsider $ACN closer to $285๐ต or at ~22.78x forward estimates (~7% below todayโs price) where I can possibly expect near double digit return potential assuming a 23x end multiple in 2026
#stocks #investing
Thank you @WisedelCapital for the request
___
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. "- Dimitry Nakhla | Babylon Capitalยฎ
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โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $ACN ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 23.04x
โข10-Year Mean: 24.03x
โขNTM FCF Yield: 5.78%
โข10-Year Mean: 5.18%
As you can see, $ACN appears to be trading slightly below fair value
Going forward, investors can expect to receive ~4% MORE in earnings per share & ~11% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $ACN is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $5.12B
โขLong-Term Debt: $71.64M
$ACN has an excellent balance sheet, an AA- S&P Credit Rating & 174x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2019: 42.1%
โข2020: 30.8%
โข2021: 32.0%
โข2022: 38.2%
โข2023: 33.8%
โขLTM: 32.3%
RETURN ON EQUITYโ
โข2019: 37.9%
โข2020: 32.1%
โข2021: 31.9%
โข2022: 32.6%
โข2023: 28.5%
โขLTM: 27.4%
$ACN has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $28.56B
โข2023: $64.11B
โขCAGR: 8.42%
FREE CASH FLOWโ
โข2013: $2.93B
โข2023: $8.99B
โขCAGR: 11.86%
NORMALIZED EPSโ
โข2013: $4.21
โข2023: $11.67
โขCAGR: 10.73%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 713.34M
โขLTM Shares Outstanding: 637.95M
By reducing its shares outstanding ~10.5%, $ACN increased its EPS by ~11.7% (assuming 0 growth)
PAID DIVIDENDSโ
โข2013: $1.62
โข2023: $4.65
โขCAGR: 11.12%
MARGINSโ
โขLTM Gross Margins: 32.6%
โขLTM Operating Margins: 15.8%
โขLTM Net Income Margins: 10.9%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~4% MORE in EPS & ~11% MORE FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ACN has to grow earnings at a 11.52% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be less than the (11.52%) required growth rate:
2024E: $12.15 (4.1% YoY) *FY August
2025E: $13.19 (8.6% YoY)
2026E: $14.80 (12.2% YoY)
$ACN has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $ACN ends 2026 with $14.80 in EPS & see its CAGR potential assuming different multiples
25x P/E: $370.00๐ต โฆ ~14.2% CAGR
24x P/E: $355.20๐ต โฆ ~12.2% CAGR
23x P/E: $340.40๐ต โฆ ~10.2% CAGR
22x P/E: $325.26๐ต โฆ ~8.0% CAGR
21x P/E: $310.80๐ต โฆ ~5.9% CAGR
As you can see, weโd have to assume >23x earnings for $ACN to have double digit CAGR potential (~10-year average multiple, yet arguably a bit rich given its growth rate)
Today at $284๐ต it appears that $ACN valuation is being re-rated due to AI-related competitive pressures & itโs growth slowdown, among other things
To ensure some margin of safety, Iโd reconsider $ACN closer to $258๐ต or at ~21.00x forward estimates (~9% below todayโs price) where I can possibly expect near double digit return potential assuming a 21x end multiple in 2026
#stocks #investing
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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 ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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A sober valuation analysis on $ACN ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 23.04x
โข10-Year Mean: 24.03x
โขNTM FCF Yield: 5.78%
โข10-Year Mean: 5.18%
As you can see, $ACN appears to be trading slightly below fair value
Going forward, investors can expect to receive ~4% MORE in earnings per share & ~11% MORE in FCF per share๐ง ***
Before we get into valuation, letโs take a look at why $ACN is a quality business
BALANCE SHEETโ
โขCash & Equivalents: $5.12B
โขLong-Term Debt: $71.64M
$ACN has an excellent balance sheet, an AA- S&P Credit Rating & 174x FFO Interest Coverage Ratio
RETURN ON CAPITALโ
โข2019: 42.1%
โข2020: 30.8%
โข2021: 32.0%
โข2022: 38.2%
โข2023: 33.8%
โขLTM: 32.3%
RETURN ON EQUITYโ
โข2019: 37.9%
โข2020: 32.1%
โข2021: 31.9%
โข2022: 32.6%
โข2023: 28.5%
โขLTM: 27.4%
$ACN has great return metrics, highlighting the financial efficiency of the business
REVENUESโ
โข2013: $28.56B
โข2023: $64.11B
โขCAGR: 8.42%
FREE CASH FLOWโ
โข2013: $2.93B
โข2023: $8.99B
โขCAGR: 11.86%
NORMALIZED EPSโ
โข2013: $4.21
โข2023: $11.67
โขCAGR: 10.73%
SHARE BUYBACKSโ
โข2013 Shares Outstanding: 713.34M
โขLTM Shares Outstanding: 637.95M
By reducing its shares outstanding ~10.5%, $ACN increased its EPS by ~11.7% (assuming 0 growth)
PAID DIVIDENDSโ
โข2013: $1.62
โข2023: $4.65
โขCAGR: 11.12%
MARGINSโ
โขLTM Gross Margins: 32.6%
โขLTM Operating Margins: 15.8%
โขLTM Net Income Margins: 10.9%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~4% MORE in EPS & ~11% MORE FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $ACN has to grow earnings at a 11.52% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be less than the (11.52%) required growth rate:
2024E: $12.15 (4.1% YoY) *FY August
2025E: $13.19 (8.6% YoY)
2026E: $14.80 (12.2% YoY)
$ACN has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $ACN ends 2026 with $14.80 in EPS & see its CAGR potential assuming different multiples
25x P/E: $370.00๐ต โฆ ~14.2% CAGR
24x P/E: $355.20๐ต โฆ ~12.2% CAGR
23x P/E: $340.40๐ต โฆ ~10.2% CAGR
22x P/E: $325.26๐ต โฆ ~8.0% CAGR
21x P/E: $310.80๐ต โฆ ~5.9% CAGR
As you can see, weโd have to assume >23x earnings for $ACN to have double digit CAGR potential (~10-year average multiple, yet arguably a bit rich given its growth rate)
Today at $284๐ต it appears that $ACN valuation is being re-rated due to AI-related competitive pressures & itโs growth slowdown, among other things
To ensure some margin of safety, Iโd reconsider $ACN closer to $258๐ต or at ~21.00x forward estimates (~9% below todayโs price) where I can possibly expect near double digit return potential assuming a 21x end multiple in 2026
#stocks #investing
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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 ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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โ Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: How does a stock fall -72% from $548 to $150? ๐ด $PAYC
When it trades for ~120x earnings.
Before a period of aggressively rising rates.
And growth doesnโt justify the valuation.
Hard to justify 120x earnings, youโd need many years of 60%+ growth.
Valuations. Matter.
#stocks https://t.co/0zX6nwZLeZ
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RT @DimitryNakhla: How does a stock fall -72% from $548 to $150? ๐ด $PAYC
When it trades for ~120x earnings.
Before a period of aggressively rising rates.
And growth doesnโt justify the valuation.
Hard to justify 120x earnings, youโd need many years of 60%+ growth.
Valuations. Matter.
#stocks https://t.co/0zX6nwZLeZ
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Offshore
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โ Dimitry Nakhla | Babylon Capitalยฎ
A sober valuation analysis on $CRM ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 23.30x
โข3-Year Mean: 38.89x
โขNTM FCF Yield: 5.18%
โข3-Year Mean: 3.68%
As you can see, $CRM appears to be trading below fair value
Going forward, investors can expect to receive ~67% MORE in earnings per share & ~40% 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: $14.19B
โขLong-Term Debt: $8.43B
$CRM has an excellent balance sheet, an A+ S&P Credit Rating & 352x FFO Interest Coverage Ratio
RETURN ON CAPITAL๐
โข2020: 1.2%
โข2021: 0.9%
โข2022: 0.8%
โข2023: 2.5%
โข2024: 8.2%
RETURN ON EQUITY๐
โข2020: 0.5%
โข2021: 10.8%
โข2022: 2.9%
โข2023: 0.4%
โข2024: 7.0%
$CRM return metrics are ok, although more recently trending in the right direction
REVENUESโ
โข2014: $4.07B
โข2024: $34.86B
โขCAGR: 23.95%
FREE CASH FLOWโ
โข2014: $576.36M
โข2024: $9.49B
โขCAGR: 32.34%
NORMALIZED EPSโ
โข2014: $0.35
โข2024: $8.22
โขCAGR: 37.11%
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 597.61M
โขLTM Shares Outstanding: 984.00M
By increasing its shares outstanding ~64%, $CRM diluted its EPS by ~39% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 75.5%
โขLTM Operating Margins: 17.2%
โขLTM Net Income Margins: 11.9%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~67% MORE in EPS & ~40% MORE FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $CRM has to grow earnings at an 11.65% 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 more than the (11.65%) required growth rate:
2025E: $9.91 (20.5% YoY) *FY Jan
2026E: $11.05 (11.5% YoY)
2027E: $12.65 (14.5% YoY)
$CRM has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $CRM ends 2027 with $12.65 in EPS & see its CAGR potential assuming different multiples
25x P/E: $316.25๐ต โฆ ~12.5% CAGR
24x P/E: $303.60๐ต โฆ ~10.8% CAGR
23x P/E: $290.95๐ต โฆ ~9.1% CAGR
As you can see, weโd have to assume >24x earnings for $CRM to have double digit CAGR potential (a multiple justified by its growth rate & moat)
Today at $234.44๐ต $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 further 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 ~$234๐ต & adding a second tranche at ~$200๐ต or at ~20x NTM earnings
#stocks #investing
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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 ๐๐ฌ ๐ญ๐จ ๐๐จ๐ฆ๐ฉ๐ฅ๐๐ญ๐๐ง๐๐ฌ๐ฌ ๐จ๐ซ ๐๐๐๐ฎ๐ซ๐๐๐ฒ.
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A sober valuation analysis on $CRM ๐ง๐ฝโโ๏ธ
โขNTM P/E Ratio: 23.30x
โข3-Year Mean: 38.89x
โขNTM FCF Yield: 5.18%
โข3-Year Mean: 3.68%
As you can see, $CRM appears to be trading below fair value
Going forward, investors can expect to receive ~67% MORE in earnings per share & ~40% 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: $14.19B
โขLong-Term Debt: $8.43B
$CRM has an excellent balance sheet, an A+ S&P Credit Rating & 352x FFO Interest Coverage Ratio
RETURN ON CAPITAL๐
โข2020: 1.2%
โข2021: 0.9%
โข2022: 0.8%
โข2023: 2.5%
โข2024: 8.2%
RETURN ON EQUITY๐
โข2020: 0.5%
โข2021: 10.8%
โข2022: 2.9%
โข2023: 0.4%
โข2024: 7.0%
$CRM return metrics are ok, although more recently trending in the right direction
REVENUESโ
โข2014: $4.07B
โข2024: $34.86B
โขCAGR: 23.95%
FREE CASH FLOWโ
โข2014: $576.36M
โข2024: $9.49B
โขCAGR: 32.34%
NORMALIZED EPSโ
โข2014: $0.35
โข2024: $8.22
โขCAGR: 37.11%
SHARE BUYBACKSโ
โข2014 Shares Outstanding: 597.61M
โขLTM Shares Outstanding: 984.00M
By increasing its shares outstanding ~64%, $CRM diluted its EPS by ~39% (assuming 0 growth)
MARGINSโ
โขLTM Gross Margins: 75.5%
โขLTM Operating Margins: 17.2%
โขLTM Net Income Margins: 11.9%
***NOW TO VALUATION ๐ง
As stated above, investors can expect to receive ~67% MORE in EPS & ~40% MORE FCF per share
Using Benjamin Grahamโs 2G rule of thumb, $CRM has to grow earnings at an 11.65% 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 more than the (11.65%) required growth rate:
2025E: $9.91 (20.5% YoY) *FY Jan
2026E: $11.05 (11.5% YoY)
2027E: $12.65 (14.5% YoY)
$CRM has an excellent track record of meeting analyst estimates ~2 years out, so letโs assume $CRM ends 2027 with $12.65 in EPS & see its CAGR potential assuming different multiples
25x P/E: $316.25๐ต โฆ ~12.5% CAGR
24x P/E: $303.60๐ต โฆ ~10.8% CAGR
23x P/E: $290.95๐ต โฆ ~9.1% CAGR
As you can see, weโd have to assume >24x earnings for $CRM to have double digit CAGR potential (a multiple justified by its growth rate & moat)
Today at $234.44๐ต $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 further 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 ~$234๐ต & adding a second tranche at ~$200๐ต or at ~20x NTM earnings
#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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