Valuentum Exclusive Analysis for the Discerning Investor

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Jan 6, 2025

HP Inc. Sets Q1'25 Expectations Below Consensus, Dividend Looks Healthy
Image Source: HP Inc. For fiscal 2025, HP Inc. expects non-GAAP diluted net earnings per share to be in the range of $3.45-$3.75, the midpoint in-line with the consensus forecast of $3.60. Free cash flow is targeted in the range of $3.2-$3.6 billion on the year, the midpoint up from $3.3 billion last fiscal year and well in excess of the company’s annual run-rate dividends of ~$1.1 billion. During fiscal 2024, the company returned $2.1 billion via share repurchases. HP ended the quarter with $3.3 billion in cash and cash equivalents and $9.7 billion in short-and long-term debt. HP is set to benefit from an AI PC refresh, and even though expectations weren’t set as high as what the market was looking for in the first quarter of fiscal 2025, HP Inc. remains a strong dividend payer. Shares yield 3.5% at the time of this writing.

Jan 5, 2025

Keeping the Horse Before the Cart: Valuentum’s Economic Castle™ Rating
Image shown: An examination of the problem that might arise by focusing exclusively on companies that have economic moats, or sustainable and durable competitive advantages.Without an economic castle, an economic moat doesn’t matter. Let's examine Valuentum's Economic Castle™ rating.

Jan 1, 2025

FedEx Lowers Fiscal 2025 Guidance Again, Plans to Separate FedEx Freight
Image: FedEx’s shares have come roaring back since its bottom in the back half of 2022. Looking to fiscal 2025, FedEx revised its revenue and earnings forecasts lower again. Revenue is now expected to be “approximately flat” year over year compared to the prior forecast calling for a low single-digit percentage increase. Diluted earnings per share before mark-to-market retirement plans accounting adjustments is now targeted in the range of $16.45-$17.45 compared to its prior forecast of $17.90-$18.90. Also excluding costs related to its business optimization initiatives, management is targeting diluted earnings per share of $19.00-$20.00 per share, down from $20.00-$21.00 per share previously. FedEx announced it will separate FedEx Freight as a new publicly-traded company, hoping to garner a higher multiple placed on the spinoff, but we’re not interested in shares of the company or its spinoff at this time. Shares yield 2%. Our favorite ideas remain in the newsletter portfolios.

Jan 1, 2025

The Price-to-Earnings Ratio Demystified
Let's examine the price-to-earnings (P/E) ratio. The key takeaways are: 1) without using a discounted cash-flow model, the P/E ratio that should be applied to a company's future expected earnings stream can never be appropriately calculated, and by extension, 2) when investors assign an arbitrary price-to-earnings multiple to a company’s earnings (based on historical trends or industry peers or the market multiple), they are essentially making estimates for all of the drivers behind a discounted cash-flow model in one fell swoop (and sometimes hastily). As earnings for next year are often within sight and can be estimated with some confidence (though this certainly varies among firms), calculating the price-to-earnings ratio via a discounted cash-flow process, in our opinion, is of far greater importance than worrying about whether a firm will beat or miss earnings in its next fiscal year. Because the P/E ratio is a discounted cash-flow model that considers the long-term qualitative dynamics of a particular entity, cash-flow analysis remains the first and most important pillar of our Valuentum Buying Index. And finally, investors cannot ignore valuation analysis or the future. Valuation is an important driver behind stock prices, and it is based on future expectations that can only be estimated. This is just a fact of the markets.

Dec 27, 2024

Nike’s Revenue Under Considerable Pressure; Turnaround Will Take Time
Image: Nike’s shares have been under considerable pressure as sales results disappoint. Nike’s outlook for the near term doesn’t provide us with much confidence. As we have noted before, Nike has a storied brand that is unmatched by rivals, but it may take more than a new CEO to turn things around. Competition remains fierce and the promotional environment intense, while consumer discretionary spending remains a big wild card. We like Nike, but we continue to stay on the sidelines until we start to see some improvement on the top line, not just better than feared results.

Dec 20, 2024

Dividend Increases/Decreases for the Week of December 20
Let's take a look at firms raising/lowering their dividends this week.

Dec 19, 2024

Shares of UnitedHealth Group and Vertex Pharma Sour
Image Source: Rodrigo Senna cc by 2.0. As of right now, we continue to monitor the situation with UnitedHealth, but the risks have substantially increased. We have no plans to remove it from the Best Ideas Newsletter portfolio at this time as we await news flow to settle down. As for Vertex, we continue to like its established position in cystic fibrosis and its opportunity in gene-editing therapies as well as a new class of medicine for acute pain that’s without the limitations of opioids. Though the news regarding suzetrigine wasn’t what the market was hoping for, the company’s pipeline is progressing nicely.

Dec 13, 2024

Dividend Increases/Decreases for the Week of December 13
Let's take a look at firms raising/lowering their dividends this week.

Dec 12, 2024

Adobe Issues Cautious Fiscal 2025 Guidance
Image Source: Adobe. Looking to fiscal 2025, Adobe expects total revenue in the range of $23.30-$23.55 billion, below the $23.8 billion consensus estimate. Digital Media segment revenue is targeted at $17.25-$17.4 billion, with ending ARR growth of 11% year-over-year, while Digital Experience segment revenue is expected to be between $5.8-$5.9 billion. Non-GAAP earnings per share is expected in the range of $20.20-$20.50 for the year, the midpoint below the consensus estimate of $20.52. Adobe ended the quarter with $7.9 billion in cash and short-term investments, while debt totaled $5.6 billion, good for a nice net cash position. We like Adobe, but its cautious outlook for 2025 keeps us on the sidelines.

Dec 11, 2024

Toll Brothers Ends Strongest Year Ever
Image Source: Toll Brothers. Looking to fiscal 2025, Toll Brothers' deliveries are expected in the range of 11,200-11,600 units with an average delivered price per home of $945,000-$965,000 and adjusted home sales gross margin expected at 27.25%. The company’s pace of deliveries is expected to be strong, but the company’s gross margin isn’t as strong as we would like, facing pressure from last year’s adjusted mark. SG&A, as a percentage of home sales revenue is expected in the range of 9.4%-9.5%, up from last year’s measure of 9.3%. Toll Brothers ended its fiscal fourth quarter with $1.3 billion in cash and cash equivalents and $2.7 billion in loans payable and senior notes. The company continues to return cash to shareholders in the form of buybacks and dividends. Though we don’t include Toll Brothers in any newsletter portfolio, the bellwether’s fiscal fourth quarter report indicates the housing market remains healthy.