⁠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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⁠Stock Analysis Compilation
Middle Coast Investing on Atkore $ATKR US

Thesis: Despite current headwinds, Atkore’s strong market position, infrastructure tailwinds, and potential recovery offer significant upside, with shares potentially doubling by 2025

(Extract from their Q3 letter) https://t.co/Y04uw5krFM
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⁠Dimitry Nakhla | Babylon Capital®
A sober valuation analysis on $NVO 🧘🏽‍♂️

•NTM P/E Ratio: 27.38x
•10-Year Mean: 25.22x

•NTM FCF Yield: 2.61%
•10-Year Mean: 3.74%

As you can see, $NVO appears to be trading near or above fair value

Going forward, investors can receive ~8% LESS in earnings per share & ~30% LESS in FCF per share 🧠***

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

BALANCE SHEET✅
•Cash & Short-Term Inv: $11.18B
•Long-Term Debt: $7.68B

$NVO has a strong balance sheet, an AA- S&P Credit Rating & 777x FFO Interest Coverage

RETURN ON CAPITAL✅
•2019: 84.4%
•2020: 71.0%
•2021: 57.7%
•2022: 65.0%
•2023: 72.3%
•LTM: 64.3%

RETURN ON EQUITY✅
•2019: 71.2%
•2020: 69.7%
•2021: 71.2%
•2022: 72.0%
•2023: 88.1%
•LTM: 88.7%

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

REVENUES✅
•2013: $13.79B
•2023: $34.40B
•CAGR: 9.57%

FREE CASH FLOW✅
•2013: $4.19B
•2023: $12.31B
•CAGR: 11.37%

NORMALIZED EPS✅
•2013: $0.85
•2023: $2.70
•CAGR: 12.25%

SHARE BUYBACKS✅
•2013 Shares Outstanding: 5.39B
•LTM Shares Outstanding: 4.47B

By reducing its shares outstanding ~17%, $NVO increased its EPS by ~20% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 84.7%
•LTM Operating Margins: 44.3%
•LTM Net Income Margins: 35.0%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~8% LESS in EPS & ~30% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $NVO has to grow earnings at a 13.69% 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 (13.69%) required growth rate:

2024E: $3.24 (20.6% YoY) *FY Dec

2025E: $3.98 (22.9% YoY)
2026E: $4.76 (19.9% YoY)

$NVO has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $NVO ends 2026 with $4.76 in EPS & see its CAGR potential assuming different multiples

28x P/E: $133.28💵 … ~12.3% CAGR

27x P/E: $133.28💵 … ~10.4% CAGR

26x P/E: $123.76💵 … ~8.6% CAGR

24x P/E: $114.24💵 … ~4.7% CAGR

23x P/E: $109.48💵 … ~2.5% CAGR

As you can see, $NVO appears to have attractive return potential IF we assume >27x earnings (a multiple above its 10-year mean, however it is a multiple justified by its growth rate & quality)

Those buying $NVO today at $106💵 are buying it for a fair price, with little margin of safety

I’ll be more interested in $NVO closer to $90💵 (15% below today’s price) where I can reasonably expect double-digit returns while assuming a 23x end multiple, ensuring some margin of safety

#stocks #investing

*Financials in USD
___

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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