⁠InsideArbitrage
QXO $QXO proposed to acquire Beacon Roofing Supply $BECN for $124.25 per share in cash.
🏗️The proposal implies a total transaction value of approximately $11 billion.
🏗️The offer was submitted to the company in a letter on November 11, 2024.

"We believe Beacon shareholders have a right to evaluate our proposal, despite the attempt by Beacon’s Board of Directors to withhold it from them,” said Brad Jacobs, CEO of QXO.

Building-Products Distributor QXO $QXO has offered to acquire Beacon Roofing Supply $BECN - WSJ

A deal could be clinched before the end of the year. https://t.co/tTpshJkTOo - InsideArbitrage
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⁠Stock Analysis Compilation
Longriver on Wise $WISE LN

Thesis: Wise is a highly profitable fintech company that prioritizes customer value by continuously lowering fees and enhancing services, making it difficult for competitors to keep up.

(Extract from their Q4 letter) https://t.co/1X6TTRAmNc
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⁠Dimitry Nakhla | Babylon Capital®
A quality valuation analysis on $NVO 🧘🏽‍♂️

•NTM P/E Ratio: 22.11
•10-Year Mean: 25.29x

•NTM FCF Yield: 3.31%
•10-Year Mean: 3.72%

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

Going forward, investors can receive ~14% MORE in earnings per share & ~11% 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: 64.4%

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✅
•2014: $13.47B
•2024E: $39.49B
•CAGR: 11.35%

FREE CASH FLOW✅
•2014: $4.16B
•2024E: $9.80B
•CAGR: 8.94%

NORMALIZED EPS✅
•2014: $0.78
•2024E: $3.15
•CAGR: 14.97%

SHARE BUYBACKS✅
•2014 Shares Outstanding: 5.26B
•LTM Shares Outstanding: 4.47B

By reducing its shares outstanding ~15%, $NVO increased its EPS by ~17.6% (assuming 0 growth)

MARGINS✅
•LTM Gross Margins: 84.7%
•LTM Operating Margins: 46.4%
•LTM Net Income Margins: 35.0%

***NOW TO VALUATION 🧠

As stated above, investors can expect to receive ~14% MORE in EPS & ~11% LESS in FCF per share

Using Benjamin Graham’s 2G rule of thumb, $NVO has to grow earnings at an 11.06% CAGR over the next several years to justify its valuation

Today, analysts anticipate 2025 - 2027 EPS growth over the next few years to be more than the (11.06%) required growth rate:

2024E: $3.15 (23.3% YoY) *FY Dec

2025E: $3.84 (21.9% YoY)
2026E: $4.30 (11.8% YoY)
2027E: $4.93 (12.6% YoY)

$NVO has an excellent track record of meeting analyst estimates ~2 years out, but let’s assume $NVO ends 2027 with $4.93 in EPS & see its CAGR potential assuming different multiples

25x P/E: $123.25💵 … ~16.9% CAGR

24x P/E: $118.32💵 … ~15.3% CAGR

23x P/E: $113.39💵 … ~13.7% CAGR

22x P/E: $108.46💵 … ~12.0% CAGR

21x P/E: $103.53💵 … ~10.3% CAGR

As you can see, $NVO appears to have attractive return potential IF we assume >22 earnings (a multiple below its 10-year mean, & a multiple justified by its growth rate & quality)

Those buying $NVO today at $81💵 are buying it for a better-than-fair price, with a small margin of safety

I consider $NVO a strong opportunity closer to $72💵 (10% below today’s price) where I can reasonably expect ~11% CAGR while assuming a 19x end multiple, ensuring a large margin of safety to compensate me for the inherent risks in the biotech / biopharma space (lack of predictability, R&D risk, patent expirations, etc.)

#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 𝐚[...]

𝐬 𝐭𝐨 𝐜𝐨𝐦𝐩𝐥𝐞𝐭𝐞𝐧𝐞𝐬𝐬 𝐨𝐫 𝐚𝐜𝐜𝐮𝐫𝐚𝐜𝐲.
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⁠Quiver Quantitative
RT @InsiderRadar: 🚨BREAKING: New Insider Purchase

The Chief Commercial Officer of $COGT, a biotech company, has just reported purchasing $332k of the company's stock.

This is the first insider purchase we have ever seen him report.
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⁠Investing visuals
You’re handed $100,000 to invest today in Palantir $PLTR or Crowdstrike $CRWD. Who are you picking? https://t.co/0NgryWVP8z
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⁠Startup Archive
RT @breckyunits: @StartupArchive_ "just iterating, step-by-step" - this seems to be the key. have 1 or 2 big ideas ("unlimited email storage space and you search don't sort"), and then tiny steps to get there. https://t.co/PpRS2NXNMf
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⁠App Economy Insights
$JPM JPMorganChase Q4 FY24.

CEO Jamie Dimon:
"The US economy has been resilient. Unemployment remains relatively low, and consumer spending stayed healthy, including during the holiday season."

• Net revenue +11% Y/Y to $42.8B ($2.1B beat).
• Net Income +50% Y/Y to $14.0B.
• EPS: $4.81 ($0.71 beat).
• Deposits and loans +1% Q/Q.
• FY25 NII ~$94B ($2.7B beat).
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⁠Stock Analysis Compilation
Hedge funds' best ideas #27 is in your inbox 🔥
(link in bio)

Includes links to the letters & articles from Alluvial / Arquitos CM / Baron Asset Fund / Baron Emerging Markets Fund / Baron Fifth Avenue Growth Fund / Baron Focused Growth Fund / Baron Global Advantage Fund / Baron International Growth Fund / Baron Opportunity Fund / Baron Real Estate Fund / Baron Small Cap Fund / Bell AM / Polen Capital
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