⁠Dimitry Nakhla | Babylon Capital®
$TMO down -17% & $DHR down -16% in the past month as the new administration’s stance on biotech & biopharma companies is currently perceived as a headwind for the sector 🧬

Watching $TMO & $DHR closely & hoping this sell-off continues 🤞🏽

#stocks #investing https://t.co/fysK5BxVx5

A sober valuation analysis on $TMO 🧘🏽‍♂️

•NTM P/E Ratio: 23.68x
•5-Year Mean: 24.92x

•NTM FCF Yield: 4.09%
•5-Year Mean: 3.59%

As you can see, $TMO appears to be trading near fair value

Going forward, investors can receive ~5% MORE in earnings per share & ~14% MORE in FCF per share 🧠***

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

BALANCE SHEET🆗
•Cash & Short-Term Inv: $6.65B
•Long-Term Debt: $31.20B

$TMO has a good balance sheet (acquisitions a big growth driver), a A- S&P Credit Rating & 6x FFO Interest Coverage

RETURN ON CAPITAL✅*
•2019: 8.3%
•2020: 13.4%
•2021: 12.8%
•2022: 10.3%
•2023: 8.7%
•LTM: 8.6%

*lower ROIC due to acquisition strategy

RETURN ON EQUITY✅
•2019: 12.9%
•2020: 19.9%
•2021: 20.5%
•2022: 16.4%
•2023: 13.1%
•LTM: 12.9%

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

REVENUES✅
•2013: $13.09B
•2023: $42.86B
•CAGR: 12.59%

FREE CASH FLOW✅
•2013: $1.73B
•2023: $6.93B
•CAGR: 14.88%

NORMALIZED EPS✅
•2013: $5.42
•2023: $21.55
•CAGR: 14.80%

SHARE BUYBACKS❌
•2013 Shares Outstanding: 365.80M
•LTM Shares Outstanding: 384.25M

MARGINS✅
•LTM Gross Margins: 40.7%
•LTM Operating Margins: 17.4%
•LTM Net Income Margins: 14.5%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~5% MORE in EPS & ~14% MORE in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $TMO has to grow earnings at an 11.84% 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 (11.84%) required growth rate:

2024E: $21.70 (0.7% YoY) *FY Dec

2025E: $23.58 (8.7% YoY)
2026E: $26.37 (11.8% YoY)

$TMO has an excellent track record of meeting analyst estimates ~2 years out, so let’s assume $TMO ends 2026 with $26.37 in EPS & see its CAGR potential assuming different multiples

27x P/E: $711.99💵 … ~14.0% CAGR

26x P/E: $685.62💵 … ~12.0% CAGR

25x P/E: $659.25💵 … ~10.0% CAGR

24x P/E: $632.88💵 … ~7.9% CAGR

As you can see, $TMO appears to have attractive return potential IF we assume >26x earnings (a multiple above its 5-year mean & multiple that may be slightly demanding given its growth rate

However, $TMO is an excellent business with a wide moat & will benefit from future ongoing sector demand

Yet, those buying $TMO today at $541💵 are buying it for a fair price, with little margin of safety

I’d be more interested in $TMO closer to $500💵 (8% below today’s price) where I can reasonably expect ~11% to ~12% CAGR while assuming a 23x - 24x end multiple, ensuring a comfortable margin of safety

#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. - Dimitry Nakhla | Babylon Capital®
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⁠Stock Analysis Compilation
Oakmark on LPL Financial $LPLA US

Thesis: LPL Financial’s strong growth, scalable business model, and attractive valuation position it well for long-term earnings potential, despite short-term market concerns.

(Extract from their Q3 letter) https://t.co/tKyWGKB276
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⁠Ahmad Jivraj
🧵 Will Tesla Kill Uber? (1/11)

The big Q: Can $TSLA make getting around more convenient, reliable & affordable than Uber? Let's break this down... 🤔
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⁠Dimitry Nakhla | Babylon Capital®
RT @qualityequities: In his book Focus: The ASML Way, Marc Hijink essentially sums up one of the most significant portions of $ASML ASML’s moat in this single paragraph:

“The Sun's corona, 93 million miles away, is the closest place you can find extreme ultraviolet light in its natural form. On Earth, however, generating EUV requires extremely sophisticated technology. One way is to shoot a powerful laser beam at a tiny droplet of hot tin. This creates a plasma, an energy charged form of gas, far hotter than the surface of the sun. In this process, invisible light with a wavelength of 13.5 nanometers is emitted. If you can catch this with a mirror, you can direct it into a lithography machine to project a chip pattern. Sounds simple: you just have to build a sun.”

$ASML ASML, the monopolistic semiconductor equipment powerhouse, has seen its shares pull back roughly 40% from all-time highs, presenting a compelling opportunity for long-term investors.

The company's recent 2024 Investor Day painted an optimistic growth trajectory. Management projects advanced logic EUV lithography spending to grow at a 10-20% CAGR from 2025 to 2030, with an even more robust 15-25% CAGR expected in DRAM applications.

Notable investors are taking advantage of the drawdown. Dev Kantesaria's Valley Forge Capital Management nearly doubled its position with a 99.72% increase, while Polen Capital Management bolstered its holdings by 31.75% in the latest quarter.

Given ASML's dominant market position and strong growth outlook, investors should consider maintaining their positions and adding during periods of weakness (like now). - Quality Equities
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AkhenOsiris
Market Musings:

Google (search) and Uber (autonomous) are dead.

You're welcome.
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AkhenOsiris
The house is happy:

BetMGM says that Tyson-Paul was its most bet combat sport fight (MMA & boxing) in its history.

The fight had 3 time the bets and 4 times the money vs. any other combat fight in its history.

67% of the money was on Tyson.
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⁠Quiver Quantitative
RT @InsiderRadar: 🚨 BREAKING: Kushner has just reported the purchase of an additional $5M in $OSCR shares.

The stock is up 9% today, and up 21% in total since we reported on his first insider purchase on the 14th. https://t.co/YdDdeRsMDS

$OSCR is up 13% at market open - Insider Radar
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⁠Quiver Quantitative
We recently caught a STOCK Act violation by Senator Markwayne Mullin.

He bought stock in a company called Stride, $LRN, back in July.

It's a for-profit education company.

Mullin sits on the Senate Committee on Education.

The stock has now risen 35% since his trade. https://t.co/u50SYh8ZbA
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⁠Startup Archive
RT @DaveCristello: This whole talk was absolute fire.
I also love how he was obsessively in all details until 50-100 employees
This feels normal and antithetical to most biz books written for corporate leadership

Reed Hastings on the role of the CEO at a startup

“In the first couple of years, you do everything—you’re doing dishes at night, you’re coding, you’re writing marketing materials, you’re dealing with customers and investors. And you have so many disadvantages as an irrelevant little nothing of a company that you have to make up for it with talent, hard work, and brute force. And so if you’re lucky, that’s only a couple of years as opposed to 10 years, where you’re just on call constantly in a very intense way.”

But once you get to 50-100 people, you have to evolve your management style entirely and adapt to be more strategic. You no longer know everyone at the company, and are no longer involved in every little detail.

At Netflix’s scale, Reed’s responsibilities are almost entirely company strategy and vision. He’ll decide which markets Netflix should be in, but he’s not picking countries or shows. He’ll decide that the marketing budget should be 5-10% of revenue, rather than 50%, but he’s not deciding what the campaign is. And lastly he’ll set the vision in terms of culture:

“What are the rules of the road of how the firm operates? What’s our character so that it’s a healthy place?”

But at Netflix’s scale, the CEO can’t do much of the work:

“It’s just too big. And if you try to, you’ll (A) burn yourself out, and (B) get everyone else upset.”

This is actually what happened at Reed’s first company Pure Software:

“I was 33, the company had grown to about 50 people, and I was still trying to code at night and trying to be CEO during the day and sleeping at work, and I wasn’t careful enough about taking showers… It was just gross… And when there was bugs in my code, it was hard to get me to fix it because I was off doing other things… I was trying to hold on too long to the dual roles.”

Video source: @GreylockVC (2015) - Startup Archive
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⁠Quiver Quantitative
RT @InsiderRadar: 🚨 JUST IN: New CEO Insider Purchase

The CEO of $TRS just reported the purchase of ~$250K of the company's stock.

This is the second insider buy we have ever seen him make this year.
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⁠Hidden Value Gems
Quite interesting how a group of researchers has developed a tool using ChatGPT to predict analyst actions after earning calls (change in PT and earning estimates).

The tool categorises the questions asked, and the answers given along four key dimensions:
- Growth potential of the company
- Earnings quality
- Quality of management
- Risks to the company

ChatGPT then scored scored each category which had a strong predictive power.

h/t Joachim Klement
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