13 Jul 2021

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Anthony Menard

Number Cruncher Extra – Netflix, Nike, Etsy & Amazon

13 Jul 2021

In our last Number Cruncher we discussed how Netflix (NFLX), Nike (NKE), Amazon (AMZN) & ETSY (ETSY) are companies with multiple qualities. Now, we will look at these stocks with our software Stockpointer.

Here is the screener we used to find these stocks

Let’s start with Netflix

The SP score of Netflix is 52 which is explained by its performance score of 71 and risk score of 53. The risk score is high compared to other companies and this is why the SP score is impacted. The company grew at a relatively constant rate of 29.1% in the last 5-year period while earnings grew by an impressive 81.8% per share during the same period. T

 

We can see here the margin improvement we talked about in the Number Cruncher, but translated into return on capital. The return on capital passed from 8.1% to 13.1% in the last 5-year. On the other hand, the company was judged less risky by investors. The cost of capital decreased from 12.1% to 8% during the same period. Consequently, the performance spread increased from -4% to 5.1% between 2017 and 2021.

 

The SP score of Nike is 63 which is explained by its performance score of 75 and risk score of 41.The last year performance of Nike is easily visuzalied by the earnings per share growth of 123.5% while sales grew by 19%.

 

Nike is a fantastic company, but we think investors need a bit of caution concerning the valuation. The share price tripled in the last 5-year, but earnings grew by only 50%.Was the market pricing not aggressive enough in the past or maybe the future is rosier than it was in the past? It is possible, but it is good to keep in mind that the valuation is not what it used to be.

 

ESTSY has a SP score of 57 which is explained by a performance score of 63 and a risk score of 44. ETSY is a small E-commerce company, but with a lot of potential.  Its 5-year sales growth almost doubled Amazon (as we’ll see next). The company seems to have reached a size large enough to reach a certain threshold of profitability as we see the explosion of the EPS in the last year. Without a surprize, the company has a growth score in the top of our database with a score of 93.

 

The current operating value (COV) of ETSY multiplied by 10 since 2016 showing that the company created substantial tangible value during this period. The share price exploded by 20 during this period. The difference between the share price and the COV is explained by the increased expectations about the company. Back in 2016, investors probably had low expectations. The expectations increased given the extraordinary results in the pandemic environment,

 

Amazon has a SP score of 64 which is explained by a performance score of 76 and a risk score of 40. Amazon, the McDonald of E-commerce, is the largest and most known e-commerce company in the world. This monster is getting bigger and bigger every year. The company has one of the highest, if not the highest, revenue of our entire database, which includes Canadian, U.S. and ADR stocks, as shown by the 100 percentile.

 


The NOPAT (orange line) and the share price (blue line) touched themselves in 2019 and again in 2021 showing lower valuation based on historical figures.  The EVA (green line) increased substantially since 2020 showing robust value creation by Amazon during the pandemic.

 

If you have any questions about the article, feel free to contact Anthony :
Amenard@Inovestor.com

If you would like to sign up for a free trial and learn how Inovestor can benefit you, contact Olivier:
Olamothe@Inovestor.com

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