⁠Dimitry Nakhla | Babylon Capital®
RT @DimitryNakhla: A sober valuation analysis on $GOOG 🧘🏽‍♂️

•NTM P/E Ratio: 19.80x
•10-Year Mean: 23.61x

•NTM FCF Yield: 4.41%
•10-Year Mean: 4.18%

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

Going forward, investors can receive ~19% MORE in earnings per share & ~5% MORE in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $93.23B
•Long-Term Debt: $10.88B

$GOOG has a strong balance sheet, an AA+ S&P Credit Rating & 370x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 16.4%
•2020: 16.2%
•2021: 27.6%
•2022: 26.1%
•2023: 28.1%
•LTM: 31.7%

RETURN ON EQUITY✅
•2019: 18.1%
•2020: 19.0%
•2021: 32.1%
•2022: 23.6%
•2023: 27.4%
•LTM: 32.1%

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

REVENUES✅
•2018: $136.82B
•2023: $307.39
•CAGR: 17.57%

FREE CASH FLOW✅
•2018: $22.83B
•2023: $69.50B
•CAGR: 24.93%

NORMALIZED EPS✅
•2018: $2.19
•2023: $5.80
•CAGR: 21.50%

SHARE BUYBACKS✅
•2018 Shares Outstanding: 14.07B
•LTM Shares Outstanding: 12.51B

By reducing its shares outstanding ~11%, $GOOG increased its EPS by ~12.3% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 58.1%
•LTM Operating Margins: 32.0%
•LTM Net Income Margins: 27.7%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~19% MORE in EPS & ~5% MORE in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $GOOG has to grow earnings at a 9.90% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2026 EPS growth over the next few years to be more than the (9.90%) required growth rate:

2024E: $8.00 (38.0% YoY) *FY Dec

2025E: $8.93 (11.6% YoY)
2026E: $10.12 (13.3% YoY)

$GOOG has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $GOOG ends 2026 with $10.12 in EPS & see its CAGR potential assuming different multiples

23x P/E: $229.54💵 … ~16.0% CAGR

22x P/E: $219.56💵 … ~13.6% CAGR

21x P/E: $209.58💵 … ~11.2% CAGR

20x P/E: $199.60💵 … ~8.8% CAGR

19x P/E: $189.62💵 … ~6.2% CAGR

As you can see, $GOOG appears to have attractive return potential IF we assume >21x earnings (a multiple below its 5-year & 10-year mean)

At >23x earnings, $GOOG has aggressive CAGR potential & it’s not unreasonable for the business to even trade for ~23x (given its growth rate, moat, balance sheet, & exemplary capital allocation)

Those buying today have a decent margin of safety given

In $GOOG latest report we saw a strong re-acceleration in cloud growth ☁️ & margins continue to expand

Today at $170💵 $GOOG appears to be a strong consideration for investment

#stocks #investing $GOOGL
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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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⁠Quiver Quantitative
RT @InsiderRadar: 🚨 BREAKING: New CEO Insider Purchase

The CEO of $ALGM just reported the purchase of ~$100K of the company's stock.

This is the first insider purchase he has reported this year. https://t.co/jBJGb6sIrL
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⁠App Economy Insights
$MELI MercadoLibre Q3 FY24:

• Revenue +35% Y/Y to $5.3B ($30M beat).
📦 Commerce +48% Y/Y to $3.1B.
💳 Fintech +21% Y/Y to $2.2B.

• GMV +14% to $12.9B.
• TPV +34% Y/Y to $50.7B.
• EPS $7.83 ($2.02 miss). https://t.co/y25lSVPnRr
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⁠Dimitry Nakhla | Babylon Capital®
Mercado Libre $MELI Reports an ok Q3 🎯

✅ Revenue: $5.31B vs $5.27B (est)

❌ Adjusted EPS: $7.84 vs $$10.59 (est)

#stocks #investing

Highlights:

•Revenue +35% YoY
•TPV +34% YoY
•GMV +14% YoY https://t.co/acLoca4wPv
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⁠Stock Analysis Compilation
Oakmark on Azelis Group $AZE BB

Thesis: Azelis’ strong market position in specialty chemicals, combined with its long-term growth potential through M&A and market share gains, offers compelling value at a discount to peers.

(Extract from their Q3 letter) https://t.co/9L6HselfKI
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⁠Startup Archive
Naval Ravikant explains why startup founders should be able to code

Naval Ravikant gave the following advice to a startup spending $25k outsourcing product development to external developers:

“You guys should be coding from the start. Web and mobile startups are so competitive right now. You have to assume that anything you’re doing, there’s a team of 2-4 dedicated, hardcore hackers working 24/7 on something extremely similar.”

He continues:

“If you have this iteration loop where you have to submit something to someone else and they have to come back to you. Then you’re like ‘no, it wasn’t quite right’ because a lot of stuff was lost in translation, you’re going to get 1-2 cycles per day at best. Meanwhile, that other team is getting 20 cycles per day. It has gotten so intense now that non-coding founders and startups are having a really difficult time adding value at these early stages.”

Video source: @Forbes (2011)
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