(Paid subscribers can find this report in PDF version and the valuation model after the paywall)
Financial markets are typically known to be fairly efficient machines when it comes to pricing assets (this could be considered their main job). The famous term known as “consensus” establishes that stock prices reflect a consolidated opinion from thousands of market participants about the public information available for any given asset. This is the theory, but reality is a bit more nuanced. While financial markets are indeed “almost perfect” in pricing assets over relatively long periods, misspricings can occur over shorter periods. These mispricings typically arise from diverging investment horizons and ultimately allow long-term investors to capture the spread between the current market perception and the true value of a given asset.
Now, the fact that the market CAN misprice assets at any given point in time doesn’t mean that it always DOES (even though some people seem to think that the market is “retarded”). This ultimately means that if we come across an asset that seems heavily mispriced we must think long and hard about the market’s variant perception (in some occasions there might not be one and the asset might simply be ignored for a host of reasons like liquidity or positioning). The above perfectly describes the company that you are going to read about today. Just to provide some context, today’s business has grown its revenue and operating profit at a 40% CAGR over the last 5 years, intends to do the same over the next 5, and yet trades at a 2026 EV/EBIT multiple of 11x. While it sounds too good to be true, management has already proven skeptics wrong once and benefited from it by remaining the largest shareholders in the business. While the market remains fixated on one side of the “equation,” management has clearly laid out that they moved to the other side of the equation long ago.
So, without further ado, let’s jump right into the business.