After multiple activist names, we will discuss a strong free cashflow (FCF) name again, which also benefits incrementally from more shareholder activism. Activists look for cheap, strong FCF generators and that is the reason why so many of the original names featured on this substack turned out to have activists either currently or in the past.
Today’s name is a FCF generator but it’s not cheap. So it would be difficult for activists to engage this name. Although peripherally, part of its business does benefit from activist actions as we shall discuss.
Our company also benefits from the 1) quantitative easing (QE) years as money poured into the finance industry since then and 2) the tectonic shift to more index based investing over the last twenty years. Here’s the quick glance of the financial numbers:
Simple Financials (Dec 26 estimate*, USD)
Sales: 15bn, EBITDA: 7.5bn
OP: 6.5bn, FCF: 6bn
Net income: 4.5bn, EPS: $13
Dividend: $4 per share, Yield: 0.8%
Debt: 11bn (Net debt), Mkt Cap 155bn
Financial Ratios
ROA: 8%, ROE: 14%
GPM: 70%, OPM: 40%
EV/EBITDA: 21.9x (Dec 26), PER: 29.8x (Dec 26)
FCF yield: 3.7%
*Based on author’s estimates
This company has grown alongside the financial markets and should continue to grow like how picks and shovels sold well during the gold rush. Finance has thrived thanks to decades of quantitative easing and easy money and looks like that’s not gonna change any time soon, tariff tantrums or not.
