2025-10-01 04:34:09
Welcome to the Premium edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
⏰ Final reminder: Our prices increase tomorrow for new members.
For free members: This is your last chance to lock in the original $119/year rate forever before it becomes $199/year. Upgrade Now and Save $80
For existing Premium members: No action is needed. Your price doesn’t change. Thank you for being a member!
🔥 The September report is here!
All the key earnings visuals from the past month in one report.
✔️ Cut through the noise with clear, concise financial snapshots.
✔️ See revenue trends, profit margins, and key takeaways instantly.
We visualized 200+ companies this season:
In case you missed it:
Download the full report below or log in to your account.
Your voice matters! Help us shape future reports. Got a company or sector you're curious about? Hit 'Reply' and let us know!
Here’s a sneak peek. 👀
What to expect in our monthly report?
🚙 Auto: NIO.
🛒 Retail: Costco.
🌯 Franchises: Darden.
🥫 FMCG: General Mills.
👔 Consulting: Accenture.
🛡️ Cybersecurity: Zscaler.
💳 Fintech: Klarna, StoneCo.
🎽 Apparel: Nike, Lululemon.
⚙️ Semis: Broadcom, Micron.
⚽️ Football: Manchester United.
😎 Tourism: Carnival, Vail Resorts.
☁️ Productivity: Asana, DocuSign, GitLab, UiPath.
📊 Data & Infrastructure: C3.ai, HPE, Rubrik, Samsara.
💼 Enterprise Software: Adobe, Figma, Oracle, Salesforce.
And more, like Chewy, FedEx, GameStop, and HealthEquity.
2025-09-27 22:01:44
Welcome to the Saturday PRO edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
🛒 Costco: Growth Moderates
🌐 Accenture: Federal Spending Cuts
Costco closed out FY25 (ending in August) with Q4 revenue growing 8% Y/Y to $86.2 billion ($100 million beat) and EPS of $5.87 ($0.06 beat). However, the beat was overshadowed by moderating growth in adjusted same-store sales to +6.4% globally and +6.0% in the US (down from 8.0% and 7.9% last quarter, respectively).
In contrast, the fundamentals of the business model remained strong. Membership fee income surged 14% to $1.72 billion, driven by upgrades to its Executive tier following the rollout of new perks like exclusive shopping hours. E-commerce remained a bright spot, growing 13.5%. The company continues to navigate tariff pressures by increasing the penetration of its higher-margin Kirkland Signature private label, attracting younger members.
Looking ahead, Costco announced plans to open 35 new warehouses in FY26, a significant uptick from the 25 added in FY25. That said, the stock remains priced for perfection. The deceleration in comparable sales growth is testing Costco’s premium valuation of ~49x forward earnings.
2025-09-26 20:03:34
Welcome to the Free edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
Every advanced piece of technology, from a supercomputer to a smartphone, is a marriage of two distinct functions: logic and memory.
🧠 Logic: These chips are the brains of devices, executing instructions and processing data, central to computers and smartphones.
🗃️ Memory: These chips focus on data storage, including DRAM for temporary storage and NAND for long-term retention.
While we recently discussed the new Intel x NVIDIA deal in the world of logic, AI demand is also creating a boom for memory.
Micron’s Q4 earnings just gave us the clearest signal yet.
Let’s review what we learned.
At a glance:
Micron’s new business units
The HBM-powered recovery
Key quotes from the earnings call
What to watch moving forward
Micron is a US-based Integrated Device Manufacturer (IDM), like Intel, but focused on designing and manufacturing memory chips.
Starting with Q4 FY25 (August quarter), Micron reorganized its entire business into four business units that mirror how customers actually buy memory chips.
Cloud Memory: $4.5 billion in revenue (+214% Y/Y). This is the AI powerhouse. It serves giant cloud companies and all High-Bandwidth Memory (HBM) needs. It’s the highest-margin segment (48% operating margin). HBM-specific revenue grew to nearly $2 billion in Q4, implying an annual run rate of ~$8 billion.
What is HBM, anyway?
Think of it like building a memory skyscraper right next to the processor, instead of a sprawling, one-story warehouse far away. By stacking DRAM chips vertically, you get incredibly high bandwidth from a smaller footprint. That’s exactly what power-hungry AI chips need. The trade-off? It’s more complex to make and costs more per bit than standard DRAM.
Core Data Center: $1.6 billion in revenue (-23% Y/Y). This is the server workhorse: This unit sells memory and storage to traditional server makers (like Dell & HP).
Mobile and Client: $3.8 billion in revenue (+25% Y/Y). This unit provides the memory and storage for all our personal gadgets, like phones and PCs.
Automotive and Embedded: $1.4 billion in revenue (+17% Y/Y). This unit supplies chips for cars, industrial machines, and other consumer electronics.
This split is designed to make Micron’s business easier to understand. It makes the economics of the all-important AI memory (HBM) business more transparent and should reduce the “lumpiness” in their quarterly results.
The only catch with the new segmentation? Year-over-year comparisons will be a bit messy for a while. Keep an eye out for when Micron releases restated historical data to make sense of the new segments.
This new structure gives us a perfect lens to view the most important story in the memory market today: the dramatic AI-driven cycle.
Numbers at a glance:
Q4 FY25 (August quarter):
Revenue grew +46%Y/Y to $11.3 billion ($0.2 billion beat).
Gross margin was 45% (+9pp Y/Y).
Non-GAAP EPS $3.03 ($0.17 beat).
Q1 FY26 guidance (November quarter):
Revenue ~$12.5 billion ($0.7 billion beat).
Gross margin > 50%.
Non-GAAP EPS ~$3.75 ($0.71 beat).
Market reaction was timid. Micron’s stock (MU) has nearly doubled so far in 2025. Wall Street’s expectations were so high that even a great report was seen as a slight letdown. This highlights the frenzy and optimism already priced into the stock.
DRAM (including HBM) is the engine. LTM DRAM revenue fell from the 2022 peak, bottomed in mid-2023, and has re-accelerated to ~$29 billion LTM (see visual). That rebound is the HBM ramp plus DDR5 strength.
NAND is stabilizing. After a long slide, NAND has climbed back to ~$9 billion LTM, helped by enterprise SSD and early AI PC tailwinds.
As HBM mix rises, DRAM dollars rise disproportionately (higher ASPs).
NAND benefits from DDR5 and client SSD recovery, smoothing cyclicality.
The memory up-cycle is here, led by HBM-driven DRAM. Micron’s new segment split reveals a clear path to higher profitability. As the mix shifts toward premium HBM products, it should raise the company’s gross margin ceiling, potentially breaking the boom-and-bust cycles of the past (see visual).
Micron’s print confirms memory remains the gating factor for AI systems in the near term. HBM inventory is tight, and gross margin is tracking to cross 50%.
Check out the post-call Q&A on Fiscal.ai here.
“The combined revenue from HBM, high-capacity DIMMs, and LP server DRAM reached $10B, more than 5× last year.”
AI data-center memory is now a franchise line, not an experiment. It’s lifting the entire data center market. It shows that the recovery is broad-based and adds another powerful (and somewhat unexpected) tailwind to the Micron story.
“We are pleased to note that our HBM share is on track to grow again and be in line with our overall DRAM share in this calendar Q3, delivering on our targets that we have discussed for several quarters now.”
Micron and SK Hynix have gained a first-mover advantage against market leader Samsung by being faster to market with the latest generations of HBM.
“As the only US-based memory manufacturer, Micron is uniquely positioned to capitalize on the AI opportunity ahead.”
Supply-chain and policy angle can resonate with US hyperscalers.
“Our HBM customer base has expanded and now includes six customers. We have pricing agreements with almost all customers for a vast majority of our HBM3E supply in calendar 2026. We are in active discussions with customers on the specifications and volumes for HBM4, and we expect to conclude agreements to sell out the remainder of our total HBM calendar 2026 supply in the coming months.”
Micron expanded its customer base from four in Q3 to six in Q4. And they are essentially sold out of their premium product more than a year in advance. It underscores the desperation of AI companies to secure memory supply. This is a real up-cycle, not a one-quarter blip.
“These supply-demand factors are there—we believe they’re durable. On the demand side, data center spend continues to increase. [...] On the supply side, customer inventory levels are healthy. Our supply is lean. Our DRAM inventories are below target.”
Murphy is making the case that strong profitability is set to continue, justifying the high expectations. However, the company notably declined to comment on whether HBM margins specifically would remain at today’s level.
The memory up-cycle is in full swing, so here’s what to watch as the story unfolds.
The HBM engine: HBM revenue is already ~$8 billion run-rate. Watch bit growth vs ASPs each quarter to see whether volume or pricing is doing the lifting.
The customization play: Watch for more news on HBM4E (coming in 2027), the next generation of memory after HBM4. Management signaled they will offer customized versions in partnership with TSMC, which could unlock higher, more defensible margins in the long run.
Production & pricing: Keep an eye on packaging throughput (the main bottleneck for HBM supply) and NAND pricing. Any sign of wavering on production discipline could signal a return to old habits.
Capex signals: Micron plans for higher CapEx in FY26, which is a bullish sign for future demand and will be updated throughout the year.
Execution bar: Higher CapEx raises the need to hit yield/throughput targets for both HBM and non-HBM DRAM.
Supply & demand hiccups: Watch for any HBM yield and cleanroom capacity, as a lack of manufacturing space will define industry-wide supply.
Pricing & customer concentration: Wall Street expects a pricing step-down for HBM3e as a few big AI buyers lock in long-term agreements, though Micron says 2026 pricing is mostly locked.
Ultimately, two clear narratives have emerged:
📈 Bull case: This is the first prolonged up-cycle since 2018, driven by broad-based strength. With HBM sold out, six customers, and the HBM4 ramp on the horizon, momentum could last for a while.
📉 Bear case: While the HBM story is strong, margin premiums may narrow next year. With the stock near peak valuation on key metrics, the risk/reward is less compelling.
The story is clear: a structural shift to high-margin HBM is underway. The data center business has shattered its old ceiling (growing from a third of overall revenue to more than half), proving that AI has reset the memory playbook.
This up-cycle could raise the industry’s margin floor and smooth future swings. But remember, cycles don’t vanish. In investing, the most dangerous words are “it’s different this time.”
That's it for today.
Happy investing!
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Start an account for free and save 15% on paid plans with this link.
Disclosure: I own AMD, ASML, and NVDA in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2025-09-23 20:03:24
Welcome to the Premium edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
Years of missed timelines and swelling capex turned Intel’s foundry ambitions into a cash drain, and confidence in a quick catch-up faded.
On the latest earnings call, CEO Lip-Bu Tan said the next-generation chip node (14A) would only work with a “meaningful external customer” to share the spend. That warning served as leverage. Either put real capital behind Intel’s foundry, or accept a future where Intel designs chips but gets them built at TSMC.
The US government steps in: Because leading-edge capacity is strategic, Washington said in August it would take a 10% stake in Intel for nearly $9 billion, converting part of previously awarded CHIPS Act funding into equity. That put the federal government on Intel’s cap table and bought time to land an external anchor customer.
NVIDIA follows: Last week, NVIDIA announced a $5 billion investment in Intel and a multi-year product collaboration.
That one-two punch (policy support and a new marquee partner) doesn’t fix execution overnight, but it resets the board for America's AI ambitions.
Meanwhile, in a move to secure its own ecosystem, Europe saw lithography leader ASML take a strategic 11% stake in Mistral AI to integrate AI across its product portfolio and accelerate the chip design process.
Let’s break it down.
Today at a glance:
The Race for AI's Foundation
🇺🇸 Intel + NVIDIA
🇪🇺 ASML + Mistral AI
FROM OUR PARTNERS
FDA clearance is a major milestone for any medical innovation. Investors watch for this, because passing FDA trials can be a potential major milestone opening greater opportunities for growth and even acquisition.
For HeartSciences (Nasdaq: HSCS), they’ve already received an FDA Breakthrough Device Designation, and their FDA submission is next.
The company has also created a software platform which is expected to offer an AI algorithm “app store” to help radically upgrade the ECG, a common heart test used by frontline healthcare workers, to detect a broader range of heart disease, earlier. The ECG is performed up to 1 billion times on patients annually, and the ECG market is projected to reach $30B by 2034.
That’s why one Wall Street analyst has a price target of $15 for HeartSciences’ stock. But today, you can invest at just $3.50 per unit (convertible preferred stock + warrant).
With the analyst target, this represents more than 500% potential upside.
Learn more and invest in HeartSciences.
This is a paid advertisement for HeartSciences Regulation A+ offering. Please read the offering circular at https://invest.heartsciences.com/
Before we break down the Intel-NVIDIA deal, we need to map the handful of companies that control the world's supply of AI chips.
The AI tech stack has 3 layers:
📱 Top: Apps (ChatGPT, Gemini, Copilot).
🧠 Middle: Models (GPT-5, Llama, Mistral).
🤖 Bottom: Compute (chips, memory, packaging).
Let’s focus on the foundational bottom layer: the world of compute.
🌐 Equipment makers → ASML, Lam Research, Applied Materials. They sell the essential tools and machinery for chip production (EUV/DUV, deposition, etch) that set the pace of progress.
🌏 Foundries → TSMC, GlobalFoundries, UMC, SMIC. They manufacture chips for others. Their business is wafer volume, yield, and packaging.
💡 Fabless designers → NVIDIA, AMD, Qualcomm (and Big Tech in-house). They design, outsource manufacturing, and focus R&D on architecture and software.
🔄 Integrated Device Manufacturers (IDMs) → Intel, Samsung, Micron, Texas Instruments. They both design and manufacture. Intel is the only US-headquartered player still pushing for leading-edge logic at scale.
⚙️ Design tools and Intellectual Property (IP) providers → Arm, Synopsys, Cadence. They provide the instruction sets, libraries, and design tools that make everything else possible.
Most leading-edge logic for AI training/inference is built at Taiwan Semiconductor Manufacturing Company, or TSMC for short (with Samsung a distant second). Concentrating that capability in one company on one island creates national security and supply chain risk for the US.
Intel is the only domestic path to on-shore leading-edge logic and advanced packaging at meaningful scale, which is why policymakers treat it as strategic infrastructure.
TSMC is a pure-play foundry with unmatched yield, customer mix, and advanced packaging that binds multiple chips and high-bandwidth memory (HBM) into one tightly connected module. That’s exactly what modern AI accelerators need. It already carries the bulk of AI accelerator volume. TSMC crossed $30 billion in revenue in Q2 and is growing at a breakneck speed.
Intel is an IDM trying to stand up a foundry-for-others business alongside its own products. If it succeeds, the US gets a second, on-shore source for cutting-edge logic and packaging, which would be critical for AI supply and bargaining power. In Q2, Intel Foundry represented $4.4 billion in revenue, a segment operating at a deep loss.
Intel delayed broad EUV adoption: In the mid-to-late 2010s, the company tried to squeeze more from DUV with complex multi-patterning at 10nm.
That choice created problems: Yield, timeline slips, and cost blow-outs, just as TSMC and Samsung leaned into EUV at 7nm/5nm, pulling decisively ahead.
Intel has since pivoted: Its 18A node is EUV-based, and it’s an early backer of High-NA EUV. But the years of delay left a gap in customer trust and capacity that policy (CHIPS Act) and partnerships must now help bridge.
Deteriorating financials: Operating profit peaked around $24 billion in 2020 and has turned negative since last year. Free cash flow has swung negative exactly when capex needs have surged.
The reason for the urgency is simple: the entire AI revolution, from training efficiency to memory bandwidth, is built on the most advanced chips available. As this technology becomes critical infrastructure for both the US industry and its national defense, relying on a single, overseas point of failure becomes an existential threat.
Now, let’s look closer at the one-two punch designed to break the bottleneck.
NVIDIA put $5 billion into Intel (at $23.28/share), and the two agreed on a multi-year product collaboration. For Intel, that’s outside demand and credibility it badly needs. For NVIDIA, it’s a critical second source for advanced packaging and a new partner for custom silicon, reducing its dependency on a single supplier
NVLink everywhere. Intel will incorporate NVLink across its stack, giving NVIDIA’s solution a stronger enterprise foothold versus Ethernet.
2025-09-20 22:02:37
Welcome to the Saturday PRO edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
🚚 FedEx: Parcel Demand Relief
🍪 General Mills: Sales Slump Continues
🫒 Darden: Inflation Bites
⚽️ Man United: Record Off The Pitch
FedEx started FY26 on a strong note, with Q1 revenue rising 3% Y/Y to $22.2 billion ($550 million beat) and adjusted EPS of $3.83 ($0.22 beat).
The Express segment again drove results, with higher yields on priority packages and increased US domestic volume offsetting ongoing weakness in the Freight segment. Cost-cutting programs continued to lift operating margin.
The key development was the reinstatement of full-year guidance, which had been withheld last quarter due to trade uncertainty. Management now forecasts revenue growth of 4% to 6% for FY26—well ahead of expectations—and adjusted EPS of $17.20 to $19.00. The confident outlook suggests a rebound in parcel demand and eased investor fears, sending the stock higher.
FedEx reaffirmed its plan to deliver another $1 billion in permanent cost savings this year and is advancing the planned spin-off of its Freight division, which is expected to be completed by June 2026. While tariff impacts on global trade remain a headwind, the FY26 guidance marks a significant reversal from last quarter’s uncertainty.
General Mills’ reset year is underway with Q1 revenue falling 7% Y/Y to $4.5 billion ($20 million miss), a decline that includes a 4-point headwind from its US yogurt business divestiture.
2025-09-19 20:03:05
Welcome to the Free edition of How They Make Money.
Over 200,000 subscribers turn to us for business and investment insights.
In case you missed it:
That’s why, before I make any investment decision, I pull the same 6 charts.
This simple process helps me challenge my own assumptions and ground my decisions in data, not hype.
Here’s the cheat sheet to filter signal from noise.
At a glance:
📈 Revenue growth (fuel)
📊 Margin trends (durability)
🛡️ Debt & leverage (resilience)
🧩 Price vs. fundamentals (reality check)
💰 Valuation spectrum (expectations)
🧭 Peer comparison (context)
Top-line growth shows where a company is in its lifecycle and what’s driving its momentum. It’s the fuel for the business.
Trend: Is Y/Y growth accelerating or slowing over the last 8–12 quarters?
Mix: Are the highest-margin segments growing the fastest?
Drivers: Is growth coming from more users (volume) or higher prices (ARPU)? Are there seasonal effects?
Quality: Is the growth organic, or is it from acquisitions (M&A)? Is it recurring or transactional?
Guidance: What is management’s outlook for the near-term and long-term?
Acceleration or steady double-digit growth favoring high-margin segments through organic usage or price (as opposed to one-offs).
2-to-3 years of revenue with a Y/Y growth trendline by segment to easily identify the leading category and make any acceleration or deceleration pop.
Trend: There's no slowdown. In fact, after a period of deceleration, core businesses like AWS have clearly rebounded and are now re-accelerating.
Callout: The high-margin engines, Advertising (+23% Y/Y) and AWS (+17% Y/Y), are the fastest-growing segments, driving the majority of the growth.
Highlight: This growth is entirely organic, a very positive signal.
Check out all of Amazon’s segments and KPI here.
Margins turn growth into cash. They reveal pricing power, cost discipline, and how well the model scales.
Gross margin: Direction over 8–12 quarters. What are the drivers (pricing, mix, input costs, infrastructure efficiency)?
Operating margin: Evidence that the engine scales without chasing costs (S&M/R&D/G&A as % of revenue drifting down).
Free-cash-flow (FCF) margin: Trailing 12-month (TTM) trend, cash conversion vs. net income, capex intensity.
Profitability mix: Are higher-margin segments gaining share, thereby lifting the company's overall margin profile?
A steady operating-margin step-up. Gross margin can wiggle with the revenue mix, and that's not necessarily a red flag. A comfortable, rising FCF margin signals optionality.
A simple three-line panel (gross, operating, FCF margin) over the last 8–12 quarters. If seasonality is heavy, I prioritize an annual view.
Trend: Gross margin has steadily expanded, and operating margin has improved even more over the past decade. The company's high FCF margin is heavily influenced by its use of stock-based compensation (SBC), a large non-cash expense.
Callout: The company's subscription model and scalable enterprise focus create clear operating leverage.
Highlight: All three margins are improving at a steady, incremental pace. This implies durable, high-quality profitability rather than one-off benefits.
A company's debt profile reveals its resilience for when things get bumpy.
Net cash / net debt trend: Direction over time. Is the company cash-rich?
Net debt / EBITDA (net leverage): Can the company pay its debt within the next four years with its existing operations?
Coverage: Is the EBIT/Interest coverage ratio trending up or down?
Maturity wall: Is there a large cluster of debt maturing in the next 12–24 months, creating refinancing risk?
Liquidity: What is the cushion from cash, investments, and undrawn credit lines?
Working capital: Is the cash conversion cycle tightening or loosening?
Positive net cash. If not, I look for net leverage below 4x (a metric I borrow from Warren Buffett) and a clear path to improvement.
A chart showing the net cash/debt position (bars) and the net leverage ratio (line) over time.
Trend: Oracle has shifted from a net cash position a decade ago to over $100 billion in net debt today (including operating lease), pushing its net leverage to a high of ~4x.
Callout: With leverage this elevated, the focus immediately shifts to the company's deleveraging path. You'd want to see this ratio stepping down and confirm there is no looming debt maturity wall.
Highlight: The true risk emerges when combining 4x leverage with plans for aggressive CapEx spending, which will likely drive free cash flow negative. This creates a precarious profile where resilience depends entirely on management executing perfectly, as discussed in our breakdown of Oracle’s earnings.
This is the reality check. A broken stock is not a broken business. Meanwhile, some stocks surge without the numbers to back it up.
Divergence & duration: Multi-quarter stretches where fundamentals rise while price is flat/down.
North-star metric: I prefer cash flow or operating income over revenue when margins are changing.
Inflections: Margin turn, GAAP profitability, or cash conversion improving.
Cheaper stock, steady business: If the market is paying less for each dollar of revenue/cash flow even as those dollars grow, that's an opportunity.
Indexing sanity: If axes differ, index all data series to a common starting point to avoid scale illusions.
Fundamentals outrunning the stock price for several quarters without a clear deterioration of the business (a general thesis intact, combined with a better entry point).
I compare the stock price vs. north-star metrics (revenue, operating income, cash from operations) on the same chart, indexed to 0 at the start of the period, if I need to clearly identify lagging or leading performance.
Trend: For years, Salesforce's fundamentals (revenue, profit, cash flow) have climbed steadily, while the share price has been much more volatile, creating clear buying opportunities in hindsight.
Callout: The chart shows the stock became visually detached and overbought relative to its fundamentals in 2021 before correcting and becoming oversold in 2022.
Highlight: This divergence forces a key question. Bull Case: The business is strong, and the stock is undervalued, meaning the gap will close as the stock price catches up. Bear Case: The stock price is a leading indicator, correctly sniffing out a future slowdown that isn't in the numbers yet.
Valuation tells you what's already priced into a stock. The key is to use the right yardstick for the right business.
Enterprise Value > Market Cap: I always use Enterprise Value (EV), which adds debt and subtracts cash from the market cap. This gives a truer picture of a company's total value.
The right metric for the business: There's no one-size-fits-all metric. I pick my yardstick based on the company's profile:
Scaling, low-profit: → EV/Revenue or EV/Gross Profit.
Profitable compounders: → EV/Free Cash Flow (EV/FCF) or EV/EBITDA.
Cyclicals/Semis: → EV/FCF or P/E on normalized numbers over a full cycle.
Banks/Insurers: → Price to Tangible Book (P/TBV) and P/E.
Forward > Trailing: Next 12 months (NTM) multiples and beyond matter most. They reflect future returns. Trailing data can be misleading if the business is rapidly improving or worsening.
Historical context: Where does today’s multiple sit versus its 5–10 year history? Is it in a low, mid, or high band?
Fundamental momentum: Are earnings estimates moving up? A rising multiple is justified if fundamentals are being revised higher. It's a red flag if they are not.
A company with an intact business thesis trading at the low end of its historical valuation spectrum. This is a classic setup for a stock to "re-rate" higher.
I chart the forward multiple over time and identify a high/median/low band. This allows for an analysis based on value, not price. As the saying goes, “price is what you pay, value is what you get.”
Trend: In 2022, Meta's valuation collapsed to a deep discount versus its history. Since then, as fundamentals improved, the stock has significantly re-rated.
Callout: After that re-rating, the stock is no longer "cheap." At a forward EV/EBITDA of ~15x, it now trades firmly in the middle of its historical range.
Highlight: This means future returns will likely come from business growth (estimate revisions), not from the multiple expansion. The investment case now hinges on ad growth, efficiency, and the payoff from AI spending.
Context beats anecdotes. The key here is to compare apples to apples. Same model, same cycle, comparable product mix, and potential. In short, don’t compare Tesla to Ford just because they both sell autos. Careful selection is key.
Apples-to-apples set: Same business model and demand cycle.
Valuation vs. peer group: Is a company getting a valuation premium?
Investigate the "why?": Is the premium backed by faster revenue growth or superior margins?
Convergence risk: If growth/margins eventually converge to peers, the initial valuation premium usually compresses.
Outlier check: Are there mix or accounting quirks (billings, services mix) that skew the comp?
Faster growth and stronger margins than most peers, while the valuation is at or only slightly above the group average. In other words, any premium is earned by the numbers, not just the story.
I pick a metric that's most consistent across the peer group and compare it over time. For example, when comparing unprofitable software businesses, I use the forward EV/Sales of the past 3 to 5 years.
Trend: For years, CrowdStrike (CRWD) has consistently traded at a significant valuation premium to its security peers. The chart clearly shows its EV/Sales multiple floating well above the rest of the group.
Callout: This premium is not guaranteed. Following a major IT outage in mid-2024, the chart shows CRWD's valuation rapidly compressing as the market questioned its execution, bringing its multiple metrics much closer to peers like Zscaler (ZS).
Highlight: The key takeaway is that a premium valuation implies a lower margin of safety. While CrowdStrike may have "earned" its premium through superior execution, any stumble can cause a painful slide toward the peer average, posing a significant risk to investors.
That's the 6-point visual scan I never skip. But what did I miss?
If you could add a 7th chart to this checklist, what would it be and why? Share your best idea in the comments!
That's it for today.
Happy investing!
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Save 15% with this link.
Disclosure: I own AMZN, CRWD, META, and NOW in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.