H&R Block, Inc. និង Light & Wonder

The Most Attractive Stocks (-6.8%) underperformed the S&P 500 (-3.9%) from May 4, 2022 through May 31, 2022 by 2.9%. The best performing large cap stock gained 5% and the best performing small cap stock was up 13%. Overall, 16 out of the 40 Most Attractive stocks outperformed the S&P 500.

The Most Dangerous Stocks (-1.8%) underperformed the S&P 500 (-3.9%) as a short portfolio from May 4, 2022 through May 31, 2022 by 2.1%. The best performing large cap short stock fell by 22%, and the best performing small cap short stock fell by 24%. Overall, 12 out of the 33 Most Dangerous stocks outperformed the S&P 500 as shorts.

ផលប័ត្រគំរូគួរឱ្យទាក់ទាញ / គ្រោះថ្នាក់បំផុតមិនមានទម្រង់ជាផលប័ត្រវែង / ខ្លីដែលមានទម្ងន់ស្មើគ្នា ១,៧% ។

Seventeen new stocks made the Most Attractive list this month, and 22 new stocks also fell onto the Most Dangerous list.

ភាគហ៊ុនដែលទាក់ទាញបំផុតមានផលចំណេញខ្ពស់ និងកើនឡើងលើដើមទុនវិនិយោគ (ROIC) និងតម្លៃទាបចំពោះសមាមាត្រតម្លៃសៀវភៅសេដ្ឋកិច្ច។ ភាគហ៊ុនដែលមានគ្រោះថ្នាក់ភាគច្រើនមានប្រាក់ចំណូលមិនច្បាស់លាស់ និងរយៈពេលនៃការឡើងថ្លៃដ៏វែងដែលបង្កប់ដោយការវាយតម្លៃទីផ្សាររបស់ពួកគេ។

Most Attractive Stocks Feature for June: H&R Block, Inc.

H&R Block, Inc. (HRB) is the featured stock from June’s Most Attractive Stocks Model Portfolio.

H&R Block has grown revenue by 2% compounded annually and net operating profit after-tax (NOPAT) by 7% compounded annually over the past five years. The company’s NOPAT fell to $156 million during the COVID-19 pandemic in fiscal 2020 (FYE is 4/30) but has since recovered to $1.2 billion over the trailing twelve months (TTM). H&R Block’s NOPAT margin has increased from 15% in fiscal 2016 to 26% TTM, while invested capital turns rose from 1.0 to 1.7 over the same time. Rising NOPAT margins and invested capital turns drive the company’s return on invested capital (ROIC) from 14% in fiscal 2016 to 43% TTM.

Figure 1: Revenue & NOPAT Since Fiscal 2016

H&R Block Is Undervalued

At its current price of $36/share, HRB has a price-to-economic book value (PEBV) ratio of 0.3. This ratio means the market expects H&R Block’s NOPAT to permanently decline by 70%. This expectation seems overly pessimistic for a company that grew NOPAT by 7% compounded annually over the past five years and 4% compounded annually over the past ten years.

Even if H&R Block’s NOPAT margin falls to 15% (equal to 20-year average, compared to 26% TTM) and the company’s NOPAT declines by 1% compounded annually for the next decade, the stock is worth $57/share today – a 58% upside. សូមមើលគណិតវិទ្យានៅពីក្រោយសេណារីយ៉ូ DCF បញ្ច្រាសនេះ. Should H&R Block grow profits more in line with historical levels, the stock has even more upside.

ព័ត៌មានលម្អិតសំខាន់ៗត្រូវបានរកឃើញនៅក្នុងឯកសារហិរញ្ញវត្ថុដោយបច្ចេកវិទ្យារ៉ូបូត - វិភាគរបស់ក្រុមហ៊ុនខ្ញុំ

Below are specifics on the adjustments I make based on Robo-Analyst findings in H&R Block’s 10-Qs and 10-K:

របាយការណ៍ប្រាក់ចំណូល៖ ខ្ញុំបានធ្វើការកែតម្រូវចំនួន 244 លានដុល្លារ ដោយមានផលប៉ះពាល់សុទ្ធនៃការដកចេញចំនួន 43 លានដុល្លារក្នុងការចំណាយមិនមែនប្រតិបត្តិការ (1% នៃប្រាក់ចំណូល) ។

Balance Sheet: I made $1.7 billion in adjustments to calculate invested capital with a net decrease of $244 million. One of the most notable adjustments was $735 million in asset write-downs. This adjustment represented 30% of reported net assets.

Valuation: I made $3.2 billion of adjustments with a net effect of decreasing shareholder value by $1.6 billion. One of the most notable adjustments to shareholder value was $805 million in excess cash. This adjustment represents 14% of H&R Block’s market cap.

Most Dangerous Stocks Feature: Light & Wonder Inc.

Light & Wonder Inc (LNW) is the featured stock from June’s Most Dangerous Stocks Model Portfolio.

Light & Wonder’s economic earnings, the true cash flows of the business, have fallen from -$76 million in 2017 to -$213 million over the TTM. The company’s NOPAT margin has fallen from 13% to 8%, while invested capital turns fell from 0.4 to 0.3 over the same time. Falling NOPAT margins and invested capital turns drive Light & Wonder’s ROIC from 5% in 2017 to 2% TTM.

រូបភាពទី ២ ចំណូលសេដ្ឋកិច្ចតាំងពីឆ្នាំ ២០១៨

Light & Wonder Provides Poor Risk/Reward

Despite its poor fundamentals, Light & Wonder is priced for significant profit growth, and I believe the stock is overvalued.

To justify its current price of $56/share, Light & Wonder must improve its NOPAT margin to 17% (all-time high in 2019, compared to 8% TTM) and grow revenue by 7% compounded annually for the next decade. សូមមើលគណិតវិទ្យានៅពីក្រោយសេណារីយ៉ូ DCF បញ្ច្រាសនេះ. In this scenario, Light & Wonder grows NOPAT by 15% compounded annually over the next ten years. Given that Light & Wonder’s NOPAT has fallen 72% since 2019, I think these expectations look overly optimistic.

Even if Light & Wonder can achieve a NOPAT margin of 12% (five-year average) and grow revenue by 6% compounded annually for the next decade, the stock is worth just $8/share today – an 86% downside to the current stock price. សូមមើលគណិតវិទ្យានៅពីក្រោយសេណារីយ៉ូ DCF បញ្ច្រាសនេះ. Should Light & Wonder’s revenue grow at a slower rate, the stock has even more downside.

Each of these scenarios also assumes Light & Wonder can grow revenue, NOPAT, and FCF without increasing working capital or fixed assets. This assumption is unlikely but allows me to create truly best-case scenarios that demonstrate how high expectations embedded in the current valuation are.

ព័ត៌មានលម្អិតសំខាន់ៗត្រូវបានរកឃើញនៅក្នុងឯកសារហិរញ្ញវត្ថុដោយបច្ចេកវិទ្យារ៉ូបូត - វិភាគរបស់ក្រុមហ៊ុនខ្ញុំ

Below are specifics on the adjustments I make based on Robo-Analyst findings in Light & Wonder’s 10-Qs and 10-K:

របាយការណ៍ប្រាក់ចំណូល៖ ខ្ញុំបានធ្វើការកែតម្រូវចំនួន 1.6 ពាន់លានដុល្លារ ជាមួយនឹងឥទ្ធិពលសុទ្ធនៃការដកប្រាក់ 189 លានដុល្លារចេញពីប្រាក់ចំណូលដែលមិនដំណើរការ (9% នៃប្រាក់ចំណូល)។

Balance Sheet: I made $5.9 billion in adjustments to calculate invested capital with a net increase of $333 million. One of the most notable adjustments was $2.3 billion in net assets from discontinued operations. This adjustment represented 33% of reported net assets.

Valuation: I made $11.4 billion in adjustments, with a net decrease to shareholder value of $7.3 billion. Apart from total debt and the net assets from discontinued operations mentioned above, the most notable adjustment to shareholder value was $396 million in excess cash. This adjustment represents 7% of Light & Wonder’s market cap.

ការលាតត្រដាងបង្ហាញ: លោក David គ្រូបង្គោលលោក Kyle Guske II និងលោក Matt Shuler មិនមានសំណងដើម្បីសរសេរអំពីភាគហ៊ុនរចនាប័ទ្មឬប្រធានបទជាក់លាក់ណាមួយទេ។