Ram Bhupatiraju Profile picture
Jan 14, 2022 19 tweets 6 min read Read on X
Ready for some chart crimes? I'm going to show 10 charts & come to the conclusions that prove my point. Haha.. just kidding, but I do want to share some interesting stuff.

Metric mainly being used is Gross Profit/EV Yield (LTM). Used @KoyfinCharts for these.
Yes I'm aware that there's a mile wide gap between Gross Profit and FCF, but a good GM margin along with huge yrly growth affords the company to spend on OPEX (hopefully spending in the right areas) while building a durable company & getting towards sustainable FCF generation.
Although I have used EV/GP/NTM growth before, I haven't used the inverted metric (LTM) to see what yield we're getting on the GP (unlike the FCF yield used on mature companies).
Looking back, anytime we get to GP/EV yield of < 2% 🚨, especially if you're entering into a big position then, we're just asking the Market to punish us.😂

You better know the Co really well and why it's GM% might improve or grow really fast. If not, watch out.
Below are 10 companies that I currently own, which are a good exercise for this. Only showing the (mostly GAAP) unprofitable growth Cos.

For each stock below, making a historical comment on the GP/EV yield and one fundamental comment on what I like to see soon.
1⃣ $ROKU

GP/EV yield now is as high as during COVID crash. Dec'18 was even higher. Overall 2018 wasn't a great year for ROKU but was a great oppty for those who saw the Platform/Ad strategy earlier.

Would like to see TRC traction, ARPU increase and less HW/supply chain issues. Image
2⃣ $SQ

GP/EV yield now is at a post COVID high. March 2020 was higher. Could be a lot of GP growth ahead on Seller side. Let's see.

Would like to see smooth acquisition/integration of Afterpay between the Seller and Cash App business. Image
3⃣ $UPST

GP/EV yield now is at the highest level since IPO days. With so much growth ahead, either the yield spikes or the stock🚀. Let's see.

Would like to see close monitoring of loan performance to ensure the current loan growth doesn't come back to bite in bad times. Image
4⃣ $TDOC

GP/EV yield now is at post COVID highs and slightly higher than 2019.

Would like to see better Management of the company, good integration (& continued development) of existing products and cross-selling. Hoping to see the business growth & stock direction aligned. Image
5⃣ $DOCU

GP/EV yield now is at post COVID highs, but still lower than 2019 (probably when it was viewed as just an E-Signature company).

Would like to see actual growth in CLM business to prove to the Market that it's not just a E-Signature company. Image
6⃣ $TWLO

GP/EV yield now surprisingly is still low and haven't reached COVID crash levels. Can't compare to 2018 when it was a different Company & also overly reliant on 2-3 customers.

Would like to see organic growth stabilize (around 40%) and good traction with Segment. Image
7⃣ $FVRR

GP/EV yield now is at post COVID high but still much lower than Pre Mar-2020 levels. Either we got way too excited with this Freelancing stuff (post COVID) or the Company has plenty of growth ahead (my current bet).

Would like to see growth in Sellers/Buyers/Business Image
8⃣ $GDRX

GP/EV yield now is highest ever. One of the Cos I cheer the most for (yeah Gov and incumbents aren't gonna bring down those prescription prices anytime soon).

Would like to see increasing consumer awareness & more utilization of the core product helping adj offerings. Image
9⃣ $PINS

GP/EV yield now is at the highest level (except the brief COVID crash). Hopefully what currently looks like value doesn't turn out to be a value trap.

Would like to see the MAU bleeding stop (or minimize), ARPU growth (both domestic/intl) and Social commerce traction. Image
🔟 $PTON

GP/EV yield now is at the highest ever. Ah! the poster child of self-inflicted wounds.😂

Would like to see Co managing costs in line with expected demand, keeping Content quality high, managing supply chain issues & especially setting right expectations with Wall St. Image
As mentioned, I was using this GP/EV (LTM) yield to show its usefulness in monitoring the high growth unprofitable Cos which might better indicate both froth and attractive periods, rather than looking at just the stock price or EV/S (as GM margin can vary hugely).
In a normal world, FCF yield of 2% is not considered attractive unless the biz is still accelerating. So when the GP yield itself is 1-2%, we're setting the business up for a huge task not to have even the slightest slowdown & asking for a continued favorable valuation period.
All these GP/EV yields could continue spiking higher due to Macro in the next few months (primarily due to the drop in stock price), but the higher it goes the more interested I'll be (unless the qtrly results show a slowing/weakening business).
All metrics have certain drawbacks and don't universally fit to all types of companies (or Co life stages). So use it contextually and along with other reliable and time tested metrics.

/END

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More from @RamBhupatiraju

Oct 18
Happy to share that Intuitive Surgical $ISRG finally became a 5⃣0⃣ bagger for me as of today (first tranche bought at the depths of GFC in March'09). The next two tranches from Nov'10 and May'14 also did their thing being 10+ baggers. Image
After $LULU did it's 100 bagger for me back in 2021 this is the next one to hit 50+ milestone.

Peter Lynch was right. Regular folks can achieve (but can't plan) for these, with some common sense investing + lot of patience when thesis is on track + even bigger amounts of luck.
@DavidGFool I gotta thank whoever was writing the free articles about $ISRG back during GFC on @themotleyfool 👏, as I would not have known about the company so early otherwise.
Read 10 tweets
Jan 20, 2023
Still here.🙋‍♂️Just got busy with some non-investing aspects of my life over the last few months.

As painful as 2022 was, it also gave me an oppty to slowly add to existing or new pos at prices I expect to fondly look back on few yrs down the lane.

Few examples (not recs) ⬇️
$MDB : Before the crash, it was X shares at avg price of $208. Now it's 5X shares at avg price of $226

$AXON : Started in 2022 with multiple adds, with current avg of $120

$ALGN : Before the crash, it was X shares at avg price of $210. Now it's 2.5X shares at avg price of $222
$MELI : Added at $680, first add to the position since 2014.

$META : Added at $92, first add to the position since 2016.

$AMZN : Added at $95, first add to the position since 2018.
Read 11 tweets
Nov 17, 2022
"Advanced Financial Statement Analysis" - Excellent document by Investopedia that's equally useful for beginners and experienced investors.

@dmuthuk @Gautam__Baid @saxena_puru

Some of my fav sections in the thread below⬇️

grahamanddoddsville.net/wordpress/File…
How Capital flows thru the Business⬇️
Basics of Cash Flow activities ⬇️
Read 9 tweets
Oct 6, 2022
Good doc by PWC on "Basic understanding of a company's Financial statements". Useful stuff for beginners.

pwc.com/jm/en/research…
Few important slides from Balance sheet
Income Statement ⬇️
Read 6 tweets
Sep 30, 2022
Excellent document on Behavioral Finance that I often refer to.

tilsonfunds.com/TilsonBehavior…

Common Mistakes ⬇️
Some very useful tips on how to use Behavioral Finance to improve your process and results. ⬇️
List of good books on the topic. ⬇️
Read 4 tweets
Sep 22, 2022
Slowly setting my cash on fire again this week.

Small adds to existing pos
$META (Social is done)
$NOW (Who needs IT monitoring anyway?)
$ALGN (Everyone from now one will have perfectly aligned teeth)
$SQ (hey guys, focus plz, actually)
$MDB (Recession will kill need for DBs).
Kidding aside, the next few qtrs are highly uncertain from a lot of aspects, but not all Cos are the same when it comes to credit dependence for capital stack/customer demand...
..cyclicality and severity of business impact during an actual recession, runway for core growth post any recession, ability to use this period to acquire smaller competitors etc.
Read 7 tweets

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