1) On valuations -
I often hear that my companies are too expensive, so I'll try and explain why they appear 'overvalued'.
First, here is a chart ('84-now) showing some of the leading growth stocks of the offline economy. Note their YOY revenue growth rates + gross margins...
I often hear that my companies are too expensive, so I'll try and explain why they appear 'overvalued'.
First, here is a chart ('84-now) showing some of the leading growth stocks of the offline economy. Note their YOY revenue growth rates + gross margins...
2) As you can see from the above chart from @ycharts , these companies are now growing their revenue by mid-single digits and even during their heyday their annual growth rates remained in the 20-30% range.
Next, look at the gross margins. Apart from $MCD and $JNJ, all other...
Next, look at the gross margins. Apart from $MCD and $JNJ, all other...
3)...companies have had to contend with mediocre gross margins (well below 50%).
What this data tells me is that these old economy businesses were never really able to grow very rapidly (due to the nature of their operations) AND their cost of producing goods has always been...
What this data tells me is that these old economy businesses were never really able to grow very rapidly (due to the nature of their operations) AND their cost of producing goods has always been...
4)...quite high.
Next, look at this chart showing the growth rates of some of my companies (I can't include all of them as @ycharts only allows 12 items per chart).
What you see here is a bunch of businesses growing at unbelievable, almost unheard of growth rates and take..
Next, look at this chart showing the growth rates of some of my companies (I can't include all of them as @ycharts only allows 12 items per chart).
What you see here is a bunch of businesses growing at unbelievable, almost unheard of growth rates and take..
5)...a good look at their gross margins!
My slowest grower in this cohort ( $TTD ) grew its revenue by 38.5%YOY over the past year and the highest growth rate ( $LVGO ) was 148.7%YOY!
Next look at their gross margins - the weakest in the group is $SQ (40%)! All the others..
My slowest grower in this cohort ( $TTD ) grew its revenue by 38.5%YOY over the past year and the highest growth rate ( $LVGO ) was 148.7%YOY!
Next look at their gross margins - the weakest in the group is $SQ (40%)! All the others..
6)...have a much higher gross margin - **significantly** better than the offline secular growers in the first group.
So, my businesses are not only growing at ridiculous, almost unheard of rates, their cost of producing their 'goods' is relatively low when compared to the...
So, my businesses are not only growing at ridiculous, almost unheard of rates, their cost of producing their 'goods' is relatively low when compared to the...
7)...traditional, brick and mortar companies.
Admittedly, many of these companies are currently unprofitable but this is because of their heavy spend on sales and marketing. Basically, they are spending heaps of cash now to grab as many customers as they possibly can because...
Admittedly, many of these companies are currently unprofitable but this is because of their heavy spend on sales and marketing. Basically, they are spending heaps of cash now to grab as many customers as they possibly can because...
8)...they know that the lifetime value of each customer is way higher than the cost of customer acquisition!
So, it makes sense for these companies to spend heavily now and grab as many customers as they possibly can!
Many of my companies are expected to compound their...
So, it makes sense for these companies to spend heavily now and grab as many customers as they possibly can!
Many of my companies are expected to compound their...
9)...revenue by 30-35%YOY over the next 4-5 years and this is what that means in the real world -
Example - current revenue $100
Compounding at 30% for 5 years -->
$100 x 1.3 x 1.3 x 1.3 x 1.3 x 1.3 = $371
So, in 5 years, many of my companies will triple or even quadruple...
Example - current revenue $100
Compounding at 30% for 5 years -->
$100 x 1.3 x 1.3 x 1.3 x 1.3 x 1.3 = $371
So, in 5 years, many of my companies will triple or even quadruple...
10)...their revenue bases and let us not forget that this revenue is 'recurring' or pretty sticky!
For sure, some of this revenue may disappear if my companies' customers go under or are unable to pay their bills due to COVID-19 but the end result will still be way better...
For sure, some of this revenue may disappear if my companies' customers go under or are unable to pay their bills due to COVID-19 but the end result will still be way better...
11)..than the significant revenue declines (80-100% in some cases) occurring in many other industries.
So, if my companies are growing like mad, they have high gross margins + their revenues are more secure than the other industries, why should they be cheap?
Hope this helps!
So, if my companies are growing like mad, they have high gross margins + their revenues are more secure than the other industries, why should they be cheap?
Hope this helps!
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