[1] Market Valuation: At P/S of 17.5, S&P 500 trading at a more expensive price compared to 13 for Our Selection
Market ValuationOur SelectionS&P 500vs S&P 500As of 11/19/2021 Price To Sales Ratio (P/S)12.917.6CheaperPrice To OpInc Ratio (P/EBIT)67.721More ExpensivePrice To Earnings Ratio (PE)85.328More Expensive
[2] Growth & Profits: Considering the valuation, the market appears to be rewarding higher expected profit growth of S&P 500 - Our Selection: better revenue growth --> 5.2% last Q (qoq), 45.1% last Q (yoy), 31.4% LTM, and 12.7% annually in last 3 FY - In comparison, S&P 500: 16.3%, 37.8%, 25.3%, and 0.4% respectively, during the same periods - However, S&P 500: greater profit generation promise --> 18.8% average margin, 4.9% average margin expansion, and 66.9% cash flow - The corresponding values for Our Selection stand at 2.3%, -0.5%, and 5.3%Note: Average margin is based on average of last Q, LTM, and last 3 FY, while margin change is based on last Q margin vs 3Y average
Growth & ProfitOur SelectionS&P 500vs S&P 500 As of 11/19/2021 Revenue GrowthLast Q Growth (QoQ)5.2%16.3%Growing SlowerLast Q Growth (YoY)45.1%37.7%Growing FasterLTM Growth31.4%25.1%Growing FasterLast 3 Fiscal Year CAGR12.7%1.1%Growing Faster ProfitabilityLast Q OpInc Margin1.2%22.7%Less ProfitableLTM OpInc Margin3.9%15.6%Less ProfitableLast 3 Fiscal Year Average1.8%17.9%Less ProfitableLTM FCF Margin5.3%66.8%Lower Cash Flow %
[3] Financial Risk: Then, is the market is assigning more risk to Our Selection? Unlikely as there is no apparent higher risk for Our Selection vs S&P 500 - Our Selection: better debt position, with debt as % of equity of 2.3% vs 19.4% for S&P 500 - Our Selection: more cash cushion, with cash as % of assets of 15.3% vs 10.7% for S&P 500
Financial RiskOur SelectionS&P 500vs S&P 500 As of 11/19/2021Debt as % of Equity2.3%19.4%Lower Debt LoadCash as % of Assets15.3%10.7%Better Cash Position
[4] Market Returns: What about market returns of Our Selection vs S&P 500? - Our Selection: higher average annualized return of 122% vs 19.7% for S&P 500 based on key market periods - These key market periods include, year-to-date, pre-covid to now, and 1, 2, and 3 years prior to covid
Precovid date is taken as end of Feb 2020
Notes:
[1] Q = quarter, LTM = last twelve months, FY = fiscal years, yoy = year-on-year, qoq = quarter-on-quarter
[2] Revenue growth decision is made by giving more weightage to long-term revenue growth (3-year average) and lesser weightage to quarterly growths
[3] Margin mentioned is average of last Q, LTM, and last 3 FY; margin increase is average of increase in last Q vs LTM and increase in last Q vs 3-FY average