This week contemplating what to do with my NVDA position post run-up, and considering how the board is increasingly talking of non-SaaS, non-subscription based companies, I wanted to look at my current portfolio with information about FY23 and FY24 guidance and EV/S calculations, gross margins, and FCF**. For FCF, I expressed not in absolute terms or even on a per share basis, but rather as a derivative of each $10,000 tranche since I don’t own equal shares of each company I’m invested in (duh). The table has provided some insights for me as I look to re-balance at the end of May, so I thought I’d share the raw results without much commentary as a jump-off for discussion.
| Company |
Gr% FY23 |
EV/S FY23 |
Gr% FY24 |
EV/S FY24 |
Gross Margin |
FCF/$10K |
| NET |
38.22 |
14.9 |
33.75 |
11.2 |
75.7 |
19.63 |
| AEHR |
29.83 |
13.5 |
58.55 |
8.5 |
50.39 |
33.58 |
| NVDA |
62 |
22.3 |
40 |
16 |
56.31 |
53.15 |
| BILL |
59.67 |
8.99 |
24.39 |
7.23 |
63.3 |
66.14 |
| MNDY |
35.74 |
10.1 |
28.1 |
7.89 |
87.97 |
78.95 |
| SNOW |
42.23 |
15.3 |
36.66 |
11.2 |
65.26 |
103.99 |
| GLBE |
43.49 |
8.7 |
35.84 |
6.4 |
39.27 |
105.6 |
| DDOG |
27.16 |
13.5 |
28.54 |
10.5 |
79.25 |
114.85 |
| PLTR |
17.9 |
11.7 |
19.67 |
9.76 |
78.78 |
117.22 |
| ZS |
47.4 |
11.3 |
28.54 |
8.8 |
77.99 |
146.99 |
| TTD |
20.55 |
16.8 |
24.29 |
13.4 |
81.64 |
150.73 |
| CRWD |
36.58 |
11.3 |
29.04 |
8.77 |
73.17 |
188.17 |
| ENPH |
40.38 |
6.77 |
26.93 |
5.34 |
42.97 |
370.89 |
| S |
54.01 |
8.3 |
42.31 |
5.86 |
65.85 |
negative |
| IOT |
54.01 |
11.1 |
42.31 |
8.7 |
72.01 |
negative |
*I’m well aware that it is difficult to compare FCF across all holdings in a portfolio, as multiple confounding variables exist. Chiefly, some companies long ago transitioned to cash machines (think AAPL or NVDA), some are still nascent growers and eschew FCF by design (S, IOT), whilst others populate the middle ground (ZS, CRWD, NET, DDOG, BILL, etc). There are other confounders too - FCF can be uneven from purchases of PP&E (property, plant and equipment) and other confounders.
35 Likes
Hi Rob,
Interesting, but could you give a better definition of what you mean by “For FCF, I expressed not in absolute terms or even on a per share basis, but rather as a derivative of each $10,000 tranche”?
In other words what do you mean by FCF divided by $10k of stock? FCF/$10k???
In further “other words,” what does your value of 370.89 for Enphase, just for instance, actually mean in plain simple words?
Thanks,
Saul
26 Likes
Hi Saul.
I’ve always been bemused by FCF/share which is an oft reported metric. After all, you and I care not how many shares of a company we own, but rather, how much of our portfolio - either % or real dollars - we have tied up in a given equity. In English parlance, my FCF illustration here is: for every $10k I invest in this company, how much free cash flow is being generated?
FCF/$10k = $10000/stock price * FCF/share
Since you asked about ENPH, this is what I gleaned: We are all re-evaluating our investment strategies, and though ENPH is a departure from our usual SaaS and recurring-revenue model, perhaps understanding that for every $10,000 you invest in ENPH they’re generating $370.89 in cold hard free cash! helps one understand the investment better.
Other things I’ve pondered this weekend:
My expression of FCF relative to dollars investment may shed some light on why CRWD and ZS trade at an EV/S premium over S (I own all three).
TTD cash flow generation as I’ve normalized it at a level behind only CRWD and ENPH in my portfolio justifies, to some extent, my acceptance of rather pedestrian growth rates (20-24% for FY 2023-24) when I consider that they are thrashing their competition in a sector with a generational paradigm shift I’m interested in investing in.
Finally, this FCF representation helps me decide my confidence level among DDOG, SNOW, and NET since I’m still long all three given my investing time-line. Though DDOG may lag in consensus growth estimates, their superior margins and FCF/$10,000 invested suggest to me that I will maintain this position whilst trimming the others.
As always, YMMV and certainly this table is not meant to be considered in a vacuum.
39 Likes
Hi Robworldwide, I couldn’t believe that Enphase actually had over $300 in FCF per $10k of stock, so I set out to prove you had made a mistake somewhere, but I found out that you were correct. Here’s my figuring.
Enphase has $822 million in trailing FCF
Enphase has 137 million shares outstanding roughly
So Enphase has $6.00 in trailing FCF per share.
Each share of Enphase is currently $174 so 57.5 shares adds up to $10,000.
And lo and behold, 57.5 shares at $6 of trailing FCF per share does indeed give you $345 of trailing FCF for $10,000 of shares. You were correct. (It was a little more when you calculated it because the stock price was a little lower)
However, $345 for $10,000 in shares is only 3.45% (just as $6 of FCF per share is 3.45% of the share price of $174), so it only has a FCF/EV Margin of 3.45% of, and the others have less.
Best,
Saul
33 Likes
Hey Robworldwide, I’d like to know if you are using any online service where you could get FCF/Share so I could build a gSheet with this metric for a list of stocks and have it automatically updated? I find myself needing to go to SA for the FCF/Share metric and input it manually.
Cheers,
G.
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Hi Will. I don’t have an automated setup, no - I’ve just been doing it manually. The FCF/share metric is updated once a quarter, so with that entered into the spreadsheet, I have my sheet spit out FCF as a function of some normalizing quantity - i.e., arbitrary dollar amount held (such as $10,000 as I discussed above in the thread) or FCF/EV which gives me the same idea.
2 Likes