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โ Dimitry Nakhla | Babylon Capitalยฎ
RT @DimitryNakhla: 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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RT @DimitryNakhla: 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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โ Dimitry Nakhla | Babylon Capitalยฎ
RT @TateTheTalisman: One inch from death.
I believe god saved our president today.
A trained marksman with a few seconds (tops) to aim โฆ was so accurate he hit the manโs ear.
They was not a โlone crazy gunmanโ ignore the MSM. This was a professional.
God saved our president. https://t.co/lzZEfJISXT
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RT @TateTheTalisman: One inch from death.
I believe god saved our president today.
A trained marksman with a few seconds (tops) to aim โฆ was so accurate he hit the manโs ear.
They was not a โlone crazy gunmanโ ignore the MSM. This was a professional.
God saved our president. https://t.co/lzZEfJISXT
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โ Dimitry Nakhla | Babylon Capitalยฎ
RT @MattWalshBlog: A roof with a direct sightline to the stage was not secured by secret service. Our choices here are extreme unbelievable negligence or something much worse.
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RT @MattWalshBlog: A roof with a direct sightline to the stage was not secured by secret service. Our choices here are extreme unbelievable negligence or something much worse.
The Shooter at the Trump Rally in Pennsylvania can be seen Dead on the Roof of a nearby Building, after being Killed by U.S. Secret Service Agents. https://t.co/6eUpiqfCeL tweet