⁠Stock Analysis Compilation
Patient Capital Management on Precigen $PGEN US

Thesis: Precigen's PRGN-2012 program offers promising therapeutic potential, with strong leadership and clinical progress, positioning the company for significant growth in the gene therapy space.

(Extract from their Q3 letter) https://t.co/5LUpD5OxoO
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⁠Hidden Value Gems
Europe and UK still look very attractive, at least according to GS. Hard to disagree. https://t.co/pd34WrCM0S
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⁠Hidden Value Gems
RT @HiddenValueGems: One of Hidden Value Gems Premium members asked us if we knew a talented analyst who could help them with financial research. They are a family office with a five-year history focused on well-managed compounders in protected niches. You can see the full description and contact details below.👇
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⁠Hidden Value Gems
Missed this. The new CEO of Prosus will receive $100mn worth of shares in Prosus and Naspers if the market cap of Prosus hits $168bn by mid-2028 and stays there for a year.

$PRX.AS $NPN.JO $TCEHY https://t.co/x3GaNvtn8l
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⁠Stock Analysis Compilation
Timesquare CM on Timee $215A JP

Thesis: Timee’s efficient platform for short-term job seekers and gig workers has made it a market leader in Japan, positioning it well for growth.

(Extract from their Q3 letter) https://t.co/c6RGB3C00d
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⁠Startup Archive
Airbnb founder Brian Chesky on how to interview and reference check new hires

Brian’s first piece of advice comes from Steve Jobs:

“Start with the results and work backwards to the people. Most people start with resumes. They start with brands — ‘Oh, this person worked at Google.’ But you should actually ask yourself: What products do I admire? And then who built those products?”

With respect to actually interviewing them, Brian’s first tip is to ask follow-up questions:

“Ask them to explain how they did something, and then the key is to ask two follow-ups. You never want the first answer. You always want the third answer. And if people don’t know what they’re talking about, they struggle. They might be able to follow-up, but the second follow-up, they become absent of details.”

But more important than interviewing, Brian argues, is references:

“I prioritize references over interviewing, especially with executives who have more experience BSing you than you have experience detecting their BS.”

Brian recalls that Andreessen Horowitz would tell him to do 8 hours of reference checks per employee:

“[That’s] probably over the top, but you should probably spend as much time referencing as you do hiring.”

He also believes the CEO should interview and reference check new hires as long as possible. Brian interviewed the first 400 people at Airbnb, but he wishes he interviewed longer.

And with respect to tactics for reference checks, Brian offers the following advice:

“A lot of people are polite. They’re afraid of the feedback getting back. So the first thing to say when you start the call is that everything is off the record — and it should be off the record. It should never be attributed to them. The more it’s unattributed to them, the more honest they’re going to be.”

On this topic, Brian recommends avoiding disqualifying questions:

“A lot of people don’t want to say somebody sucks or is not good… Say, ‘Okay, separate from this topic, I just want to know who’s the best person you’ve ever worked with?’ Do they say the person’s name you just asked about? They usually tell the truth and if they don’t say that person’s name, they’re not the best, right?”

And then ask for specifics:

“They said they’re amazing — well why are they amazing? What would you point to? If they have no specifics, maybe they weren’t really good… Then ask questions like, ‘Okay, what do I need to watch out for if I were to hire them?’ or ‘What’s the one area of development you would give them?’ If you say that, they have to tell you something because they’ll feel like they’re not thoughtful enough…. And then you ask them at the end who else you should talk to: ‘Can you give me two more names?’ And then you use that to build a network.”

Brian believes recruiting should be more like building a talent network than a sales pipeline.
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⁠Dimitry Nakhla | Babylon Capital®
PayPal Reports Q3 Earnings Tomorrow 🌅 👇🏽

A sober valuation analysis on $PYPL 🧘🏽‍♂️

•NTM P/E Ratio: 18.12x
•All-Time Mean: 29.65x

•NTM FCF Yield: 7.59%
•All-Time Mean: 5.05%

As you can see, $PYPL appears to be trading below fair value

Going forward, investors can receive ~63% MORE in earnings per share & ~50% MORE in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $13.62B
•Long-Term Debt: $9.73B

$PYPL has an excellent balance sheet, an A- S&P Credit Rating, & 20.78x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 12.4%
•2020: 11.5%
•2021: 13.6%
•2022: 12.7%
•2023: 14.8%
•LTM: 15.8%

RETURN ON EQUITY✅
•2019: 15.2%
•2020: 22.7%
•2021: 20.0%
•2022: 11.5%
•2023: 20.5%
•LTM: 22.0%

$PYPL has strong return metrics, highlighting the financial efficiency of the business

REVENUES✅
•2018: $15.45B
•2023: $29.77B
•CAGR: 14.01%

FREE CASH FLOW❌*
•2018: $4.66B
•2023: $4.22B
•Decrease: (9.44%)

*LTM FCF is $6.70B 📈

*Also, FCF in 2017 was $1.86B, so FCF rose ~150% in 2018 start date (“normalizing” the decline above)

NORMALIZED EPS✅
•2018: $2.42
•2023: $5.10
•CAGR: 16.07%

SHARE BUYBACKS✅
•2015 Shares Outstanding: 1.20B
•LTM Shares Outstanding: 1.08B

By reducing its shares outstanding by 10.0%, $PYPL increased its EPS by 11.1% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 39.6%
•LTM Operating Margins: 17.1%
•LTM Net Income Margins: 14.3%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~63% MORE in EPS & ~50% MORE in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $PYPL has to grow earnings at an 9.06% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2024 - 2026 EPS growth over the next few years to be greater than the (9.06%) required growth rate:

2024E: $4.42 (-13.4% YoY) *FY Dec

2025E: $4.82 (9.2% YoY)
2026E: $5.41 (12.1% YoY)

$PYPL has an ok track record of meeting analyst estimates ~2 years out, but let’s assume $PYPL ends 2026 with $5.41 in EPS & see its CAGR potential assuming different multiples

20x P/E: $108.20💵 … ~13.9% CAGR

19x P/E: $102.79💵 … ~11.2% CAGR

18x P/E: $97.38💵 … ~8.5% CAGR

As you can see, $PYPL appears to have attractive return potential if we assume >19 earnings & aggressive return potential if we assume >20x earnings

The 🔑 isn't a mean reversion in $PYPL's multiple, but a modest increase (still below its historical average) - a reasonable and safe assumption

Everyone wanted $PYPL when it traded 50x earnings, not many wanted it when it traded for 12x earnings ☯️

There’s STILL negative sentiment around $PYPL and this sentiment is already being changed as management continues to make progress towards its goals as we’ve seen in the most recent quarters

Today at $81.70💵 $PYPL still appears to be a strong consideration for investment (albeit, with some turnaround & competitive risks)

#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.
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