AkhenOsiris
Zip, an AI-powered procurement platform, announced today that it has helped customers achieve $4.4 billion in savings since its launch in 2020. The company, which serves enterprises across industries including technology, financial services, and healthcare, is leveraging artificial intelligence to streamline procurement processes and drive cost efficiencies.
Rujul Zaparde, Zip’s founder and CEO, explained in an exclusive interview with VentureBeat how these savings are realized, saying, “We make it really easy for somebody to actually follow the right path, which means that a team like procurement or a strategic sourcing team can actually get looped in earlier.” This early involvement allows for more strategic purchasing decisions and better negotiation opportunities.
Zip’s AI capabilities have expanded significantly in recent years. Zaparde highlighted new functionalities, such as advanced contract review, telling VentureBeat, “We can actually flag more complicated notions of risks…That’s not something that was possible a year ago or a year and change ago.”
The platform integrates with OpenAI’s technology to power its AI features. However, Zaparde emphasizes that Zip’s value lies in its enterprise-grade capabilities and focus on user experience. “We’ve sort of set the standard and created a category for intake and orchestration in the enterprise,” he said.
As concerns about AI accuracy persist, especially in reviewing complex legal documents, Zaparde acknowledges the importance of human oversight. “For you, as a customer, to be really confident, you should, of course, have a human review it. But we do also recommend the output.” However, he notes that the AI is “much more consistent than a human—and it is way faster.”
Zip’s customer base includes notable names like OpenAI, Anthropic, Sephora, Reddit, Snowflake and Lyft. The company also serves highly regulated industries, including public healthcare systems and banks, underscoring its commitment to data security and privacy.
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Zip, an AI-powered procurement platform, announced today that it has helped customers achieve $4.4 billion in savings since its launch in 2020. The company, which serves enterprises across industries including technology, financial services, and healthcare, is leveraging artificial intelligence to streamline procurement processes and drive cost efficiencies.
Rujul Zaparde, Zip’s founder and CEO, explained in an exclusive interview with VentureBeat how these savings are realized, saying, “We make it really easy for somebody to actually follow the right path, which means that a team like procurement or a strategic sourcing team can actually get looped in earlier.” This early involvement allows for more strategic purchasing decisions and better negotiation opportunities.
Zip’s AI capabilities have expanded significantly in recent years. Zaparde highlighted new functionalities, such as advanced contract review, telling VentureBeat, “We can actually flag more complicated notions of risks…That’s not something that was possible a year ago or a year and change ago.”
The platform integrates with OpenAI’s technology to power its AI features. However, Zaparde emphasizes that Zip’s value lies in its enterprise-grade capabilities and focus on user experience. “We’ve sort of set the standard and created a category for intake and orchestration in the enterprise,” he said.
As concerns about AI accuracy persist, especially in reviewing complex legal documents, Zaparde acknowledges the importance of human oversight. “For you, as a customer, to be really confident, you should, of course, have a human review it. But we do also recommend the output.” However, he notes that the AI is “much more consistent than a human—and it is way faster.”
Zip’s customer base includes notable names like OpenAI, Anthropic, Sephora, Reddit, Snowflake and Lyft. The company also serves highly regulated industries, including public healthcare systems and banks, underscoring its commitment to data security and privacy.
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Offshore
Photo
Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: $CVS down ~22% since this post 📉
This highlights the importance of considering factors beyond value when investing ‼️
Thorough analysis of quality and capital allocation decisions is crucial to lessen the odds of falling into ‘value traps’
While $CVS made a strategic decision in acquiring Aetna, subsequent acquisitions of Oak Street Health and Signify Health were corrosive to shareholder value
Optimal resource allocation and operational efficiency maximization following the Aetna acquisition would have been the more effective approach for $CVS
#stocks #investing
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RT @DimitryNakhla: $CVS down ~22% since this post 📉
This highlights the importance of considering factors beyond value when investing ‼️
Thorough analysis of quality and capital allocation decisions is crucial to lessen the odds of falling into ‘value traps’
While $CVS made a strategic decision in acquiring Aetna, subsequent acquisitions of Oak Street Health and Signify Health were corrosive to shareholder value
Optimal resource allocation and operational efficiency maximization following the Aetna acquisition would have been the more effective approach for $CVS
#stocks #investing
@scroogecapital May be undervalued, yet I don’t consider $CVS investable due to its poor capital allocation & balance sheet … from the moment I can’t consider it a high-quality business, I stay away
No need for me to consider $CVS when I have many others to choose from 💪🏽 tweet
Offshore
Photo
Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: A sober valuation analysis on $LULU 🧘🏽♂️
•NTM P/E Ratio: 21.14x
•10-Year Mean: 35.94x
•NTM FCF Yield: 3.80%
•10-Year Mean: 2.16%
As you can see, $LULU appears to be trading below fair value
Going forward, investors can receive ~70% MORE in earnings per share & ~75% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $LULU is a good business
BALANCE SHEET✅
•Cash & Short-Term Inv: $2.24B
•Total Debt: $1.40B
$LULU has an excellent balance sheet
RETURN ON CAPITAL✅
•2020: 32.5%
•2021: 23.8%
•2022: 37.4%
•2023: 40.4%
•2024: 39.0%
RETURN ON EQUITY✅
•2020: 38.0%
•2021: 26.1%
•2022: 36.8%
•2023: 29.0%
•2024: 42.0%
$LULU has strong return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2014: $1.59B
•2024: $9.62B
•CAGR: 19.72%
FREE CASH FLOW✅
•2014: $171.93M
•2024: $1.64B
•CAGR: 25.33%
NORMALIZED EPS✅
•2014: $1.91
•2024: $12.77
•CAGR: 20.92%
SHARE BUYBACKS✅
•2014 Shares Outstanding: 146.04M
•LTM Shares Outstanding: 127.06M
By reducing its shares outstanding ~13%, $LULU increased its EPS by ~15% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 58.3%
•LTM Operating Margins: 22.9%
•LTM Net Income Margins: 16.1%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~70% MORE in EPS & ~75% MORE in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $LULU has to grow earnings at a 10.57% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over next few years to be slightly above the (10.57%) required growth rate:
2025E: $14.16 (10.9% YoY) *FY Jan
2026E: $15.86 (12.0% YoY)
$LULU has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $LULU ends 2026 with $15.86 in EPS & see its CAGR potential assuming different multiples:
25x P/E: $396.50💵 … ~19.2% CAGR
24x P/E: $380.64💵 … ~16.2% CAGR
23x P/E: $364.78💵 … ~13.1% CAGR
22x P/E: $348.92💵 … ~10.0% CAGR
As you can see, $LULU appears to have attractive return potential IF it can demand a >22x multiple
However, it’s important to keep in mind that it’s difficult to maintain a strong competitive advantage (over long periods of time) in the athletic apparel space & recent growth concerns amid increased competition is why $LULU stock is trading near the lowest end of its historical multiple range
$LULU can demand a >20x multiple IF it beats growth estimates over the next few years, signaling that the sell-off due to competitive pressures may be overdone
I don’t believe it’s unreasonable to rely on ~22x (especially given $LULU return metrics, balance sheet, & strong history of growth — $LULU has grown its revenues ANNUALLY since 2007 🤯)
Today at $300💵 $LULU appears to be a worthwhile consideration for investment — albeit with several competitive risks (and how $LULU responds) that should be monitored closely
#stocks #investing
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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 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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RT @DimitryNakhla: A sober valuation analysis on $LULU 🧘🏽♂️
•NTM P/E Ratio: 21.14x
•10-Year Mean: 35.94x
•NTM FCF Yield: 3.80%
•10-Year Mean: 2.16%
As you can see, $LULU appears to be trading below fair value
Going forward, investors can receive ~70% MORE in earnings per share & ~75% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $LULU is a good business
BALANCE SHEET✅
•Cash & Short-Term Inv: $2.24B
•Total Debt: $1.40B
$LULU has an excellent balance sheet
RETURN ON CAPITAL✅
•2020: 32.5%
•2021: 23.8%
•2022: 37.4%
•2023: 40.4%
•2024: 39.0%
RETURN ON EQUITY✅
•2020: 38.0%
•2021: 26.1%
•2022: 36.8%
•2023: 29.0%
•2024: 42.0%
$LULU has strong return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2014: $1.59B
•2024: $9.62B
•CAGR: 19.72%
FREE CASH FLOW✅
•2014: $171.93M
•2024: $1.64B
•CAGR: 25.33%
NORMALIZED EPS✅
•2014: $1.91
•2024: $12.77
•CAGR: 20.92%
SHARE BUYBACKS✅
•2014 Shares Outstanding: 146.04M
•LTM Shares Outstanding: 127.06M
By reducing its shares outstanding ~13%, $LULU increased its EPS by ~15% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 58.3%
•LTM Operating Margins: 22.9%
•LTM Net Income Margins: 16.1%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~70% MORE in EPS & ~75% MORE in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $LULU has to grow earnings at a 10.57% CAGR over the next several years to justify its valuation
Today, analysts anticipate 2025 - 2026 EPS growth over next few years to be slightly above the (10.57%) required growth rate:
2025E: $14.16 (10.9% YoY) *FY Jan
2026E: $15.86 (12.0% YoY)
$LULU has a decent track record of meeting analyst estimates ~2 years out, so let’s assume $LULU ends 2026 with $15.86 in EPS & see its CAGR potential assuming different multiples:
25x P/E: $396.50💵 … ~19.2% CAGR
24x P/E: $380.64💵 … ~16.2% CAGR
23x P/E: $364.78💵 … ~13.1% CAGR
22x P/E: $348.92💵 … ~10.0% CAGR
As you can see, $LULU appears to have attractive return potential IF it can demand a >22x multiple
However, it’s important to keep in mind that it’s difficult to maintain a strong competitive advantage (over long periods of time) in the athletic apparel space & recent growth concerns amid increased competition is why $LULU stock is trading near the lowest end of its historical multiple range
$LULU can demand a >20x multiple IF it beats growth estimates over the next few years, signaling that the sell-off due to competitive pressures may be overdone
I don’t believe it’s unreasonable to rely on ~22x (especially given $LULU return metrics, balance sheet, & strong history of growth — $LULU has grown its revenues ANNUALLY since 2007 🤯)
Today at $300💵 $LULU appears to be a worthwhile consideration for investment — albeit with several competitive risks (and how $LULU responds) that should be monitored closely
#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 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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Offshore
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Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $ADP 🧘🏽♂️
•NTM P/E Ratio: 24.41x
•10-Year Mean: 27.28x
•NTM FCF Yield: 5.83%
•10-Year Mean: 4.49%
As you can see, $ADP appears to be trading below fair value
Going forward, investors can receive ~12% MORE in earnings per share & ~29% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $ADP is a great business
BALANCE SHEET✅
•Cash & Short-Term Inv: $3.29B
•Long-Term Debt: $2.99B
$ADP has a strong balance sheet, an AA- S&P Credit Rating & 11x FFO Interest Coverage
RETURN ON CAPITAL✅
•2019: 36.4%
•2020: 36.0%
•2021: 35.2%
•2022: 55.8%
•2023: 64.0%
•LTM: 60.9%
RETURN ON EQUITY✅
•2019: 45.2%
•2020: 44.2%
•2021: 45.5%
•2022: 66.3%
•2023: 101.3%
•LTM: 88.9%
$ADP has strong return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2014: $12.21B
•2024E: $51.65B
•CAGR: 6.39
FREE CASH FLOW✅
•2014: $1.66B
•2024E: $4.66B
•CAGR: 10.87%
NORMALIZED EPS✅
•2014: $3.14
•2024E: $9.15
•CAGR: 11.28%
SHARE BUYBACKS✅
•2014 Shares Outstanding: 483.10M
•LTM Shares Outstanding: 413.75M
By reducing its shares outstanding ~14.3%, $ADP increased its EPS by ~16.7% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 47.9%
•LTM Operating Margins: 26.0%
•LTM Net Income Margins: 19.6%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~12% MORE in EPS & ~29% more in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $ADP has to grow earnings at a 12.21% 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 (12.21%) required growth rate:
2024E: $9.15 (11.2% YoY) *FY Jun
2025E: $10.00 (9.3% YoY)
2026E: $10.85 (8.5% YoY)
$ADP has a good track record of meeting analyst estimates ~2 years out, so let’s assume $ADP ends 2026 with $10.85 in EPS & see its CAGR potential assuming different multiples:
27x P/E: $292.95💵 … ~12.6% CAGR
26x P/E: $282.10💵 … ~10.6% CAGR
25x P/E: $271.25💵 … ~8.6% CAGR
24x P/E: $260.40💵 … ~6.6% CAGR
As you can see, $ADP appears to have attractive return potential if we assume at least 26x earnings (a multiple below its 10-year mean & on the lower end of its range)
Sure, $ADP growth alone may not necessarily support a 26x multiple, however $ADP is a quality business with over 80% recurring revenues, more than 25 years of annual dividend increases making it a dividend aristocrat, high margins, historical linearity in earnings, historical outperformance during down markets, & is the leader of its space with minimal competition
All these reasons, among other things, make me believe that $ADP deserves a premium multiple
Today at $239💵 $ADP appears to be a decent consideration for investment
Sure, there may not be a great margin of safety, so it may be wise to piece into the position, e.g. add 1/3 of the position at $239, 1/3 at $210, & 1/3 at $190
#stocks #investing
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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.
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A sober valuation analysis on $ADP 🧘🏽♂️
•NTM P/E Ratio: 24.41x
•10-Year Mean: 27.28x
•NTM FCF Yield: 5.83%
•10-Year Mean: 4.49%
As you can see, $ADP appears to be trading below fair value
Going forward, investors can receive ~12% MORE in earnings per share & ~29% MORE in FCF per share 🧠***
Before we get into valuation, let’s take a look at why $ADP is a great business
BALANCE SHEET✅
•Cash & Short-Term Inv: $3.29B
•Long-Term Debt: $2.99B
$ADP has a strong balance sheet, an AA- S&P Credit Rating & 11x FFO Interest Coverage
RETURN ON CAPITAL✅
•2019: 36.4%
•2020: 36.0%
•2021: 35.2%
•2022: 55.8%
•2023: 64.0%
•LTM: 60.9%
RETURN ON EQUITY✅
•2019: 45.2%
•2020: 44.2%
•2021: 45.5%
•2022: 66.3%
•2023: 101.3%
•LTM: 88.9%
$ADP has strong return metrics, highlighting the financial efficiency of the business
REVENUES✅
•2014: $12.21B
•2024E: $51.65B
•CAGR: 6.39
FREE CASH FLOW✅
•2014: $1.66B
•2024E: $4.66B
•CAGR: 10.87%
NORMALIZED EPS✅
•2014: $3.14
•2024E: $9.15
•CAGR: 11.28%
SHARE BUYBACKS✅
•2014 Shares Outstanding: 483.10M
•LTM Shares Outstanding: 413.75M
By reducing its shares outstanding ~14.3%, $ADP increased its EPS by ~16.7% (assuming 0 growth)
MARGINS✅
•LTM Gross Margins: 47.9%
•LTM Operating Margins: 26.0%
•LTM Net Income Margins: 19.6%
***NOW TO VALUATION 🧠
As stated above, investors can expect to receive ~12% MORE in EPS & ~29% more in FCF per share
Using Benjamin Graham’s 2G rule of thumb, $ADP has to grow earnings at a 12.21% 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 (12.21%) required growth rate:
2024E: $9.15 (11.2% YoY) *FY Jun
2025E: $10.00 (9.3% YoY)
2026E: $10.85 (8.5% YoY)
$ADP has a good track record of meeting analyst estimates ~2 years out, so let’s assume $ADP ends 2026 with $10.85 in EPS & see its CAGR potential assuming different multiples:
27x P/E: $292.95💵 … ~12.6% CAGR
26x P/E: $282.10💵 … ~10.6% CAGR
25x P/E: $271.25💵 … ~8.6% CAGR
24x P/E: $260.40💵 … ~6.6% CAGR
As you can see, $ADP appears to have attractive return potential if we assume at least 26x earnings (a multiple below its 10-year mean & on the lower end of its range)
Sure, $ADP growth alone may not necessarily support a 26x multiple, however $ADP is a quality business with over 80% recurring revenues, more than 25 years of annual dividend increases making it a dividend aristocrat, high margins, historical linearity in earnings, historical outperformance during down markets, & is the leader of its space with minimal competition
All these reasons, among other things, make me believe that $ADP deserves a premium multiple
Today at $239💵 $ADP appears to be a decent consideration for investment
Sure, there may not be a great margin of safety, so it may be wise to piece into the position, e.g. add 1/3 of the position at $239, 1/3 at $210, & 1/3 at $190
#stocks #investing
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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.
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Dimitry Nakhla | Babylon Capital®
RT @SShevda: @DimitryNakhla I should have listened to you rather than Barclay with target of 110 $ :))
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RT @SShevda: @DimitryNakhla I should have listened to you rather than Barclay with target of 110 $ :))
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Offshore
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AkhenOsiris
$GOOGL
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$GOOGL
ROSENBLATT cuts $GOOGL to neutral:
“:. multiple areas of transitional risk that recommend stepping back for a little while to see how the company handles it. Areas of risk include the AI's impact on search .. nascent evidence of search share loss to Bing .. the transitioning of search ad revenue to retail media networks seems set to accelerate as other retailers such as $WMT follow $AMZN lead ..
“.. We also see risk that competitive dynamics push Alphabet into a higher-than-anticipated capex spending cycle ..” [Crockett] - Carl Quintanillatweet