Transcription
And hello to everyone and welcome to EQVest for a new video in which I will present to you five stocks that, in my opinion, are currently undervalued on the stock market. And we will start right away with Meta. Uh, I will not talk to you about Intuit or Constellation Software because I have talked about them a lot recently. You will also find the analysis of Intuit available on the channel, and these are two stocks concerned by the AI Apocalypse, so they have been really destroyed with the arrival of AI. So obviously they are undervalued. So I think it's less interesting to present them. And by the way, we have the Bagger selections that were released recently, well, today on the application. These lists are 100% free and 100% public. So you can share them, you can consult them even if you don't have a Bagger account or if you don't have a Bagger premium account. And you can see that we have an AI Apocalypse list that contains 14 stocks. 14 stocks that you see here that have been cut by AI. Go check them out, it will give you investment ideas. There are many different themes. We will put the public link in the description, and you can share the lists one by one, and you will also find all my watchlists and all my public portfolios, again via the link in the description if you want to access them. So if we go back to Meta, so Meta, it is really undervalued today, and it is, in my opinion, one of the best opportunities of the moment. Now, even if the problem is that every time I talk about it, it goes up, so I hope it won't go up too high. But we still have room. I think I don't need to present the business model of Meta to you. You know it quantitatively. It's a magnificent company. There's nothing to complain about, and what will interest us is the valuation. And by the way, in addition to that, you can see that it is held by many super investors. We find notably Ackman who owns 11%, David Rolf 7%, Chase Coleman, Pat Dorsey, François Rochon, etc. You have the list here of all the super investors who own Meta. But what will interest us in the valuation is the calculation of the fair price. You can see that my fair price is at 845 dollars based on an assumption of earnings per share growth of 16% per year, as well as an estimated final multiple of 25. So this means that we are betting on a P/E in 5 years at 25. Knowing that if we look at Meta's P/E today, it is at 21.93, well below its 5-year median which is at 25. So hence the fact that I selected 25, it's simply the 5-year median. So in fact, what does this tell us? It tells us that over a 5-year period, half the time Meta has been below and half the time Meta has been above this median. If we look at 10 years, the median is 27. So in fact, what really distorts the analysis is obviously the undervaluation in 2022 when there was all the story with the metaverse which made Meta fall enormously, but since then you can see that it is really stabilizing around 275 more or less. So for me, it's a valuation level that is perfectly coherent for Meta. If we look at the Forward P/E, it's at 19, so it's much lower, given that the Forward P/E is obviously based on growth forecasts. So you see here, these are the analysts' growth forecasts. If we go into results, we see them there, the EPS growth forecast with an average growth of 18% anticipated for Meta. And you see that it beats forecasts by 100% over the last 10 quarters. So clearly, it's a company on which we can trust the estimates. They are often accurate and they are even often below what Meta actually does. And also a point I wanted to come back to was the PEG, the PEG ratio. So if you know this ratio, you know that when it's below 1, it means the company is undervalued. When it's above 1, it means the company is overvalued. So how do we calculate the PEG? We take the P/E and divide it by the company's growth. So here, in this case, how do we calculate it in Bagger? we divide it by the 10-year CAGR. So the average, in fact, of the rolling 10-year growth. So this means that each year, we will take the rolling CAGR of the last 10 years and divide the P/E by this growth rate. And so we get 0.77, even at its lowest, you see 0.61. So Meta was clearly undervalued since below 1 means that we are paying less, more or less, in terms of valuation multiple, than the company's growth potential. And also, we have an EPS yield around 4.456, which is very, very coherent, and you can see that the forward P/E is collapsing in the coming years. So here, we are at 19 in TTM, but we go up to 2030 at 10 of Forward P/E. So clearly for me, Meta is a very, very good opportunity today. And you see that the margin of safety is exceptional with almost everything in the green. So, what does this tell us? It tells us that if Meta doesn't achieve 16% growth per year but only 10%, and it's still valued at 25 multiple, well, we get 13% return per year. So we are still profitable on the investment. The same if it achieves 16% but instead of being valued at 25, it's valued at 20, we get 14% per year. So we are still profitable. So more or less, a very, very good margin of safety for Meta. I am monitoring this company a lot right now. The second company I want to talk to you about is Microsoft. I recently bought Microsoft, by the way. The point is not yet available on the chart here because I haven't imported my statements yet. Microsoft, similarly, it's a company that is heavily held by super investors, notably Bill Ackman. Bill Ackman, who made a great purchase of Microsoft, as he bought a lot of it last quarter after having reduced his position in Google. So in fact, he reallocated from Google to Microsoft, and now if we look at his portfolio, Microsoft represents 15% of the portfolio. So you can also see Bill Ackman's performance over the last 5 years and also over the last 10 years, where he performs better than the S&P 500 most of the time, except since the beginning of the year overall where he underperforms the S&P 500, but otherwise he still has a very, very good performance, our dear Bill Ackman. So Microsoft, similarly, no need to present the business model. Quantitatively, it's also excellent. And at the valuation level, here we have a fair price at 479 dollars with a margin of safety of almost 20%. All this on an assumption of 14% annual growth in earnings per share and still an estimated final multiple of 25. I like this level of 25 because it's a level that I consider reasonable for magnificent companies and which more or less always corresponds to their historical median. So 14% annual growth, why? Again, it doesn't come from nowhere. If we go into the results. EPS forecast, 19% annual growth at the analysts' level. So clearly, we are below by taking 14%. We have a good margin of safety. You can also see that even if we don't achieve 14% but only 12% annual growth, we are still profitable with a 15% return. So if we look a little at Microsoft's multiples, so at the P/E level today, we are at 22. So we are below the 5-year median which was at 33. And if we look at 10 years, the median was 32. So Microsoft is historically more expensive than Meta, as you can see. But today we are clearly below, and my hypothesis is conservative since I put 25 as the median, whereas I could have put 30, you see, compared to Microsoft's 10-year history. At the forward P/E level, similarly, we are undervalued since we are at 19, which is very, very low with a 5-year median at 30 and a 10-year median at 27. At the PEG level, here again, we are below 1. So this is a really very, very positive signal. I really like the PEG for that. We are at 0.99, even though it has recently gone up. Personally, I bought it on July 1st, so I must have bought it a little cheaper. I think I bought it around 364 dollars from memory. So it must have been around 0.8 PEG when I bought it. But again, more or less, when you are below one, it means the company is undervalued. Above one, it means the company is rather expensive. And the P/E yield, it's also at 4.452. So 4.5% P/E yield is generally a quite interesting level. And you can also see a new graph that has appeared in the Bagger application, it's the fair value, and again, at the fair value level, it indicates that it is undervalued. So how is this fair value calculated? In fact, all the details of the calculation are explained in the tooltip. Here, in short, we will take the historical valuation multiples of Microsoft and we will also apply a quality factor. So, depending on the quantitative quality of the company, based on Bagger's quantitative score, we will apply a premium or a discount to Microsoft's historical valuation. And this allows us to calculate this fair value, which indicates that Microsoft today should rather be priced at 552 dollars, and it is at 384. So it is clearly undervalued, and similarly, if we look at the linear regression where Microsoft would rather be around 490 dollars today if we follow the linear regression, and similarly if we look at 10 years, you see that it is rather at 623 dollars. So all indicators are green for Microsoft as well. Next, I want to come back a bit to Adyen. So Adyen, I analyzed it recently on the channel, you will find the analysis, and it's a PEA company. So it's the only PEA company in this ranking, but it's also a company that is extremely cheap today. Quantitatively, it's exceptional. So for those who don't know Adyen, it's a payment system company. So in fact, it's the equivalent of Stripe for those who know Stripe, but Adyen is a bit more niche in the sense that it's rather used for large groups that will have an online presence, so via e-commerce sites, but also in physical stores via POS terminals, shops, etc. So they have, for example, LVMH as a client, but they have many large companies like that that have physical and online commerce. So it's a quantitatively exceptional company, which is very, very good. Personally, I really like Adyen's business model, and it's really, really undervalued today. I have a fair price of 100 euros with an estimated growth of 16% and a final multiple of 25. The growth, we are at 18% on analysts' estimates. So clearly, I have taken a margin of safety too. That's why I put 16 and 25 as the estimated final multiple. Here, it's very simple, we take the P/E. The P/E, if we look, it's at 55 on the 5-year median and on 10 years, it's at 89. Now, Adyen is a slightly special case. Uh, why? Because in fact, it's quite recent. It had its IPO in 2019, so we don't have much history, and it was very, very, very expensive for a long period, and now it's only returning to reasonable price levels, because clearly above 50 P/E, it was monstrously overvalued. So similarly, at the forward level, it's at 21. So we are at much more reasonable levels than before. And at the fair value level, the fair value would be around 2300 euros, but of course the fair value here is distorted. It's distorted. Why? Because since we are basing it on history, and Adyen's history is completely uncorrelated with its current valuation, well, of course the fair value is much less representative, similarly for the linear regression. So Adyen, it's a company that I'm monitoring, that I think I will strengthen at these price levels, below 900 euros, I consider it a good deal. Next, we have Mastercard. Mastercard, which is starting to rise a bit to 522 dollars. Mastercard, similarly, is a company that is heavily held by super investors, notably Dev, Cantessaria, Chuck H, Gispar, Marc Massé, etc. And it's a quantitatively exceptional company, so exceptional that it's rated 20/20 on the quantitative score. And at the valuation level, I have a fair price at 620 dollars based on 14% annual growth in free cash flow per share and 28 price to free cash flow. So for free cash flow per share, I based myself on EPS growth because it's quite reliable, I find, to take EPS growth, which is around 16% for Mastercard. Simply because if we look at the history, the two tend to, let's remove forecasts and TTM, the two tend to grow at roughly the same pace. So you see about 14.6% for EPS, well, for earnings at least, versus 15.9% for free cash flow. So it's more or less the same, within 1%. So it's quite reliable. I put 14 and 28 as final multiples. So, we have a good margin of safety of 15% as well. If we look at the fair value and the linear regression, we are obviously below. At the price to free cash flow ratio level, we are at 26, knowing that we have a 5-year median at 34 and a 10-year median at 35. So, we are clearly undervalued today compared to Mastercard's history. And at the price to free cash flow growth level, so the PFGC. So this is the equivalent of PEG, but with free cash flow, we are at 1.73. So here, we are still more expensive than Microsoft or Meta, which I presented just before, but we are still largely undervalued compared to the median which is 2.52 over 5 years. So there you go, Mastercard, it's also a position that I'm monitoring, that I've slightly strengthened, it was in April that I strengthened it. I made a purchase at 507 dollars in April, and maybe I'll strengthen it in the coming months. We'll see if it doesn't go up too much, obviously. And finally, the last company I want to talk to you about is S&P Global. S&P Global is also a company that I'm monitoring, that I might strengthen soon. Quantitatively, it's also very, very good, even though many figures and ratios are distorted by the acquisition it made in 2022 of IHS Markit, so the entire Automotive Mobility Revenue segment that you see here, which was bought in 2022 but will be spun off this year. So in fact, the company will split off this division from the group. So it will divest, well, in short, it will create a new entity, a new company that will only serve to house this mobility revenue to separate S&P Global and the new company which will surely be listed independently. So if you are a shareholder of S&P Global, know that you will receive free shares pro rata of this new company, and it is also likely to positively revalue the company since it will be simpler to value it. Similarly here, at the growth estimation level. So for EPS, we are at 16% per year over the next 5 years. I chose 10% per year for free cash flow per share and 25 as final multiples. So a truly conservative hypothesis at 436 fair price with a good margin of safety, but a bit less than the others. But that's normal since I was more conservative in my growth assumptions. By the way, S&P Global is also a company that is heavily held by super investors Dev Cantessaria, Chris On, Pat Dorsey, Lilou, etc. And it's a company that is today undervalued compared to its history. At the fair value level, obviously, at the linear regression level too. But if we look at the price to free cash flow, it's at 22 versus 31 on its 5-year median and 27 on its 10-year median. At the price to free cash flow growth level, we are at 1.71 today. And at the free cash flow yield level, we are at 4.42. So another company that, in my opinion, is undervalued and that I'm looking at and that I might strengthen soon if there's an opportunity. So there you go, as a reminder, you will find all the companies I have on my watchlist on my public Bagger profile. You have the link in the description. You will also find my entire portfolio if you want to get inspired. Of course, this is not investment advice. You make all your investment choices and you are responsible for your investments. But this way, you know the companies I'm watching the most right now. There are others, obviously, that are starting to be undervalued, notably Nvidia, which is still undervalued, Amazon as well, and we also have Hermes, which is starting to reach interesting price levels, even though I find it a bit expensive, and I might strengthen Hermes, I would say, if it starts to come around 1400 euros. That's really a price zone I'm waiting for for Hermes. So, tell me in the comments which undervalued companies you are looking at right now. And with that, I'll say goodbye for a new video.