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🗞️ 10 Growth Stocks at Record-Low Valuations

Fishing for cheap growth stocks. Plus, Benioff's bold claim.

Written by: Ryan Henderson & Braden Dennis

Happy Sunday!

This week we’re talking the Salesforce Slowdown, Dell’s tumultuous conference call, and 10 growing companies at record-low multiples.

Let’s dig in.

News Roundup
  • Oil Consolidation Continues: This week, the 3rd largest oil company in the US, ConocoPhillips, announced that it agreed to acquire Marathon Oil for a $22.5 billion price tag including debt. That’s a roughly 15% premium to Marathon Oil’s stock price before the deal.

    This seems to be yet another step on the road to consolidation within the US oil industry. Last year, Chevron announced it was acquiring Hess for $53 billion, while ExxonMobil paid $64.5 billion to buy Pioneer Natural Resources.

  • Ackman Eyes IPO: Billionaire investor Bill Ackman announced this week that he plans to take his hedge fund (Pershing Square Capital) public within the next couple of years. News has also circulated that Ackman plans to sell part of his stake in a private funding round which values the hedge fund at ~$10.5 billion.

    Pershing Square currently manages around $16.3 billion in assets and primarily aims to hold long-term stakes in well-known companies. Here are Pershing Square’s US-listed holdings as of their latest 13F filing.

Earnings:
  • Costco: The 2nd largest grocery chain in the US announced its 3rd quarter earnings this week, beating expectations across the board. The company delivered 7% comp store sales across all its locations this quarter, which significantly outpaced the growth of other large retailers such as Walmart, Kroger, and Target. Costco, which has been almost a 9-bagger over the last decade, now trades at its most expensive earnings multiple ever at ~53x.

  • Dell Technologies: Dell Technologies saw its stock decline by 18% on Friday after a tumultuous conference call. The IT solutions provider which generates the majority of its earnings from selling storage solutions reported better than expected earnings, but lost investor confidence during the earnings call. Here was the exact question from Bernstein analyst Tonu Sacconaghi that cost Dell nearly $20 billion in its market cap:

    If I just look year over year at the ISG business, storage was perfectly flat. AI servers went from zero to 1.7 billion, which sort of suggests that traditional servers were flat. So really the only thing that changed was you added 1.7 billion in AI servers, and operating profit was flat. So does that suggest that operating margins for AI servers were effectively zero?

    And if that's not the case, how do you square the circle with what I just outlined? Thank you.”

    The concerns over AI server profitability sent the stock plummeting after hours.

  • Salesforce: Leading CRM software provider Salesforce reported 1st quarter results on Thursday that came in below analyst expectations. The company delivered $9.1 billion in revenue for the quarter, which is an 11% increase from a year prior and saw a major improvement in its profit margins versus the same time a year ago. However, the decline in revenue growth is leaving many investors concerned about a potential slowdown in overall software spending. Salesforce’s stock closed down 14% this week.

Recommended Content

10 Growing Companies At Record-Low Valuations

  • Market Cap: $191 billion

  • 10-Year Revenue CAGR: 32%

  • EV/EBIT: 8.8x

  • Market Cap: $73 billion

  • 10-Year Revenue CAGR: 2.4%

  • EV/EBIT: 13.7x

  • Market Cap: $38 billion

  • 10-Year Revenue CAGR: 20.5%

  • EV/EBIT: 16.7x

  • Market Cap: $18 billion

  • 10-Year Revenue CAGR: 14.8%

  • EV/EBIT: 11.5x

  • Market Cap: $10.3 billion

  • 10-Year Revenue CAGR: 23%

  • EV/FCF: 14.8x

Product Improvements

Charting Annotations ✍️ 

You asked for it, so we built it.

This week, the FinChat team rolled out some new improvements that allow users to annotate charts with 4 different metrics.

On any chart, users can now add:

  1. Average

  2. Median

  3. Minimum

  4. Maximum

Meme of The Week

When Salesforce claims they are the best at mergers & acquisitions:

During Salesforce’s 1st quarter conference call, CEO Marc Benioff boldly claimed “I don’t think any company has been more successful on M&A than Salesforce”.

While Salesforce has made some seemingly successful acquisitions in the past like its $2.5 billion purchase of ExactTarget in 2013, it’d be difficult to call its more recent purchases like Tableau at 12x sales and Slack at 26x sales anywhere close to home runs.

Naturally, the confidence of this statement drew some discussion amongst investors on which companies truly are the best acquirers. Here are a few companies that might deserve a claim for that title:

Facebook (now Meta): Facebook acquired Instagram for $1 billion in 2012. In court documents released this year, it was revealed that Instagram generated $32.4 billion in revenue in 2021 alone!

Google: Though Google isn’t completely transparent about its revenue by subsidiary, the company has made several acquisitions over the last 2 decades that have clearly turned into major successes including DoubleClick ($3.1 billion), YouTube ($1.65 billion), and Android ($50 million) just to name a few.

Constellation Software: Beyond the successful acquisitions of tech giants, serial acquirers like Constellation Software have made a living off of acquiring overlooked companies at discount prices. Mark Leonard (pictured in the meme above) is the president of Constellation Software which has been successfully acquiring vertical market software companies for nearly 3 decades.