Latest news with #FCF
Yahoo
7 hours ago
- Business
- Yahoo
IHS Holding Limited (IHS): A Bull Case Theory
We came across a bullish thesis on IHS Holding Limited (IHS) on Deep Value Capital's Substack. In this article, we will summarize the bulls' thesis on IHS. IHS Holding Limited (IHS)'s share was trading at $5.22 as of 28th May. A telecommunications tower reaching high into the sky, connected to a satellite system. IHS Holdings (IHS) is a misunderstood infrastructure powerhouse the market has mispriced as a risky, FX-exposed telecom play concentrated in Nigeria. In reality, IHS operates a high-margin telecom tower business across emerging markets like Nigeria and Brazil, where mobile data usage is surging and 4G/5G penetration is set to rise from 57% to 86% by 2029. Its model is simple and scalable: mobile carriers lease space on IHS towers via long-term, inflation-linked contracts—adding tenants drives near-pure profit, with minimal incremental cost. This recurring, CPI-protected revenue base underpins a robust infrastructure compounding story, with management targeting $1B in run-rate free cash flow (FCF) by 2029. Recent moves validate the strategy: IHS sold a non-core fiber business at 5x its current EBITDA multiple, signaling that the market's current valuation deeply discounts its asset quality. Meanwhile, free cash flow margins are climbing, and the company is trading at a steep discount despite improving fundamentals. Management's guidance for 2025 appears conservative, hinting at a potential beat-and-raise setup. Despite FX volatility and geopolitical noise, the math points to a 6.5x upside from current levels, with the potential for significant re-rating as investors reappraise IHS as a critical digital infrastructure enabler in fast-growing regions. In the face of rising data demand, tower utilization, and CPI-linked escalators, IHS stands to compound cash flows for years, and recent portfolio actions plus management's capital discipline bolster the bullish case. This is a classic case of market misperception creating outsized opportunity for those willing to look beyond headlines. For a comprehensive analysis of another standout stock covered by the same author, we recommend reading our summary of their bullish thesis on Atlassian Corporation (TEAM). Since our coverage, the stock is up 2.3%. IHS Holding Limited (IHS) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 22 hedge fund portfolios held IHS at the end of the first quarter which was 17 in the previous quarter. While we acknowledge the risk and potential of IHS as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than IHS but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock. READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock. Disclosure: None. This article was originally published at Insider Monkey. Errore nel recupero dei dati Effettua l'accesso per consultare il tuo portafoglio Errore nel recupero dei dati Errore nel recupero dei dati Errore nel recupero dei dati Errore nel recupero dei dati
Yahoo
14 hours ago
- Business
- Yahoo
We Think You Should Be Aware Of Some Concerning Factors In KSL Holdings Berhad's (KLSE:KSL) Earnings
KSL Holdings Berhad's (KLSE:KSL) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company's free cash flow (FCF) matches its profit. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. The ratio shows us how much a company's profit exceeds its FCF. As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future". KSL Holdings Berhad has an accrual ratio of 0.22 for the year to March 2025. Therefore, we know that it's free cashflow was significantly lower than its statutory profit, which is hardly a good thing. In the last twelve months it actually had negative free cash flow, with an outflow of RM430m despite its profit of RM423.8m, mentioned above. We saw that FCF was RM82m a year ago though, so KSL Holdings Berhad has at least been able to generate positive FCF in the past. Having said that, there is more to the story. The accrual ratio is reflecting the impact of unusual items on statutory profit, at least in part. View our latest analysis for KSL Holdings Berhad Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of KSL Holdings Berhad. Given the accrual ratio, it's not overly surprising that KSL Holdings Berhad's profit was boosted by unusual items worth RM57m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If KSL Holdings Berhad doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year. KSL Holdings Berhad had a weak accrual ratio, but its profit did receive a boost from unusual items. For the reasons mentioned above, we think that a perfunctory glance at KSL Holdings Berhad's statutory profits might make it look better than it really is on an underlying level. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 2 warning signs for KSL Holdings Berhad (1 makes us a bit uncomfortable) you should be familiar with. Our examination of KSL Holdings Berhad has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
15 hours ago
- Business
- Yahoo
We Think You Should Be Aware Of Some Concerning Factors In KSL Holdings Berhad's (KLSE:KSL) Earnings
KSL Holdings Berhad's (KLSE:KSL) healthy profit numbers didn't contain any surprises for investors. We believe that shareholders have noticed some concerning factors beyond the statutory profit numbers. AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company's free cash flow (FCF) matches its profit. The accrual ratio subtracts the FCF from the profit for a given period, and divides the result by the average operating assets of the company over that time. The ratio shows us how much a company's profit exceeds its FCF. As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While it's not a problem to have a positive accrual ratio, indicating a certain level of non-cash profits, a high accrual ratio is arguably a bad thing, because it indicates paper profits are not matched by cash flow. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future". KSL Holdings Berhad has an accrual ratio of 0.22 for the year to March 2025. Therefore, we know that it's free cashflow was significantly lower than its statutory profit, which is hardly a good thing. In the last twelve months it actually had negative free cash flow, with an outflow of RM430m despite its profit of RM423.8m, mentioned above. We saw that FCF was RM82m a year ago though, so KSL Holdings Berhad has at least been able to generate positive FCF in the past. Having said that, there is more to the story. The accrual ratio is reflecting the impact of unusual items on statutory profit, at least in part. View our latest analysis for KSL Holdings Berhad Note: we always recommend investors check balance sheet strength. Click here to be taken to our balance sheet analysis of KSL Holdings Berhad. Given the accrual ratio, it's not overly surprising that KSL Holdings Berhad's profit was boosted by unusual items worth RM57m in the last twelve months. While we like to see profit increases, we tend to be a little more cautious when unusual items have made a big contribution. When we crunched the numbers on thousands of publicly listed companies, we found that a boost from unusual items in a given year is often not repeated the next year. And, after all, that's exactly what the accounting terminology implies. If KSL Holdings Berhad doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year. KSL Holdings Berhad had a weak accrual ratio, but its profit did receive a boost from unusual items. For the reasons mentioned above, we think that a perfunctory glance at KSL Holdings Berhad's statutory profits might make it look better than it really is on an underlying level. So if you'd like to dive deeper into this stock, it's crucial to consider any risks it's facing. For instance, we've identified 2 warning signs for KSL Holdings Berhad (1 makes us a bit uncomfortable) you should be familiar with. Our examination of KSL Holdings Berhad has focussed on certain factors that can make its earnings look better than they are. And, on that basis, we are somewhat skeptical. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Globe and Mail
21 hours ago
- Business
- Globe and Mail
Nvidia's Free Cash Flow and FCF Margins Skyrocket - NVDA Stock Looks Cheap
Nvidia Inc. (NVDA) reported strong revenue, free cash flow (FCF), and FCF margins for its fiscal Q1 ended April 27, 2025. This implies a much higher valuation for NVDA stock, over $191 per share. Short put plays are also attractive here, and they have high yields. NVDA is off today at $134.18 in midday trading. This provides a good buy opportunity for value investors, as this article will show. I previewed Nvidia's FCF and FCF margins and a valuation (price target) in my May 25 Barchart article. I suggested NVDA was worth $161.48. Now, I'm upgrading this target to over $191 per share. That represents a potential gain of 43% above today's price. Here's why. Strong Free Cash Flow (FCF) Nvidia's Q1 revenue of $44.06 billion was stronger than guided for the quarter (my estimate was $43.2 billion). That represented a gain of almost 12% over the prior quarter (+11.9% from $39.331 billion). The same was true for its adjusted gross margin (i.e., 71.5% vs. management's guidance of up to 71%). However, the astounding news was its free cash flow (FCF) and FCF margins. This can be seen in the table below. It shows that its FCF skyrocketed 68% over the prior quarter and 75% YoY. More importantly, it shows that as a percent of revenue, i.e., its FCF margins, Nvidia's results were stellar. The FCF margin rose to over 59% from about 40% in the prior quarter and 57% a year earlier. In addition, its capital expenditures (capex) rose from $1.077 billion last quarter to $1.227 billion in Q1. In other words, Nvidia's management has been squeezing more cash out of operations, despite higher capex spending and higher revenue. This is a sign of operating leverage - i.e., FCF rises as a percent of revenue as sales rise. The bottom line is that this has huge implications for the value of Nvidia stock. I was previously expecting a FCF margin of just 39.5%. With its recent 59.3% FCF margin, the company has generated significantly more FCF as a percent of revenue over the last year. For example, Seeking Alpha now shows that the trailing 12-month (TTM) operating cash flow ending April 2025 was $76.158 billion. After deducting $4.094 billion in capex spending over the last year, its FCF was $72.064 billion. That represented 48.5% of its TTM revenue of $148.515 billion, according to Seeking Alpha. We can use that FCF margin to estimate FCF going forward. Price Targets for NVDA Stock Analysts now project that revenue this year ending Jan. 31, 2026, will rise to $199.75 billion and $251 billion next year. That puts it on a run-rate revenue for the next 12 months (NTM) of $225 billion. So, to be conservative, let's say that FCF margins will average 48% over the next 12 months (NTM): $225b NTM sales x 48% FCF margin = $108 billion FCF est. This is significantly higher than the $76 billion it made over the last 12 months ($76.158 billion) and $60.85 billion it made in 2024. As a result, the market is likely to give NVDA stock at least a 2.3% FCF yield (i.e., a 43x multiple). Here is how that works: $108b x 43 = $4,644 billion, or $4.64 trillion market value That is 18.8% higher than today's market value of $3,256 billion, according to Yahoo! Finance. In other words, NVDA stock is worth 42.6% more than its price today of $134.18: $134.18 x 1.426 = $191.34 p/sh This means over the next year, if Nvidia averages a 48% FCF margin, its market value and price could rise 43% from today's price. Analysts tend to agree. Barchart reports that the mean price is $167 with a high of $220. AnaChart's average price target is now $177.68 from 40 analysts. That is up from $169.78, as I reported last week. Shorting OTM Puts However, this could take a while to occur. One way to set a lower buy-in target, or, for existing shareholders, to get paid while waiting for the stock to rise, is to short out-of-the-money (OTM) put options. For example, the July 3 put options at the $130 strike price (i.e., 3% below today's price) have a midpoint premium of $4.73. That represents an immediate yield of 3.64% ($4.73/130 = 0.03638) to a short-seller. However, this is fairly close to today's price, and more risk-averse investors may want to set a lower put strike price. The $128 put option has a premium of $4.00, but that is still a very high yield of 3.125% (i.e., $4.00/$128.00 = 0.03125). This still has a fairly high delta ratio of 33%, implying a one-third chance that NVDA could fall to $128 over the next 34 days. Typically, an investor wants to short puts with slightly lower delta ratios. For example, the $126.00 strike price put option, 6.3% out-of-the-money, has a 27% delta ratio with a premium of $3.10 at the midpoint. That still represents a high yield of 2.46% for a short-seller. As a result, an investor can set a series of trades that could produce an average 3.0% yield over the next month, to July 3. These would likely have an average strike price around 4.5% to 5% below today's price. The breakeven points would be even lower. The bottom line is that NVDA stock looks very cheap here. Shorting out-of-the-money (OTM) put options in one-month out expiry periods provides high yields and lower buy-in target prices.
Yahoo
a day ago
- Business
- Yahoo
Why Canopy Growth Stock Crashed on Friday
Canopy Growth failed to grow in Q4. It shrank instead. Sales declined, losses were much worse than predicted, and free cash flow remains negative. Free cash flow was less negative than earlier in the year, but improvements are too slow in coming. 10 stocks we like better than Canopy Growth › Canopy Growth (NASDAQ: CGC) stock collapsed in morning trading Friday, down 20.5% through 11 a.m. ET after the company reported a comically bad earnings miss. Heading into today's report, analysts forecast the Canadian cannabis company would lose $0.20 per share in its fourth quarter of fiscal 2025. Instead, Canopy Growth reported a loss of (better sit down for this) $1.32 per share. Investors were not amused. Canopy management tried to put a brave face on the results, leading off its report by noting Canadian sales, at least, grew 4% year over year, and Canadian medical cannabis sales in particular grew 13%. CEO Luc Mongeau noted further that he has taken "decisive actions to accelerate growth and profitability by unifying our medical cannabis businesses globally" (even though he highlighted cannabis sales in Canada separately). He also argued Canopy has made "marked year-over-year improvement in Adjusted EBITDA and cash flow in FY2025," and remains "committed to achieving positive Adjusted EBITDA in the near-term and positive Free Cash Flow over time." But Canopy is not there yet. Globally, Canopy's sales fell 11% in Q4, and free cash flow was negative $36.2 million. For the full year, sales were down 9% and FCF was negative $176.6 million. Viewed in the most favorable light, therefore, one could argue that at least cash burn is decelerating at Canopy (four quarters of $36.2 million cash burn would imply a FCF run rate of only negative $144.8 million). But sales growth is still negative, and it got even more negative in the year's final quarter. Sorry, folks. I just can't find a reason to want to own Canopy Growth stock until this trend improves. Before you buy stock in Canopy Growth, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the for investors to buy now… and Canopy Growth wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $638,985!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $853,108!* Now, it's worth noting Stock Advisor's total average return is 978% — a market-crushing outperformance compared to 171% for the S&P 500. Don't miss out on the latest top 10 list, available when you join . See the 10 stocks » *Stock Advisor returns as of May 19, 2025 Rich Smith has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Why Canopy Growth Stock Crashed on Friday was originally published by The Motley Fool Sign in to access your portfolio
