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Stock Valuation Of The Week

July 14, 2025

YETI Holdings has carved out a strong lifestyle brand in the premium outdoor and drinkware space, but its valuation has been beaten down, now trading at a substantial discount to our fair value estimate of $53.10. This implies 66% upside for long-term investors. The company’s free cash flow history is uneven, with negative years early on (notably 2015–2016) but a sharp improvement starting in 2017. After a peak in 2020 at $343M — boosted by pandemic-driven demand — FCF declined but has remained solid in 2023 ($235M) and 2024 ($219M), indicating renewed operational stability. While the 5-year CAGR of 40% is impressive, our valuation uses a more conservative growth rate of 14.1%, in line with long-term brand-driven cash flow trends. With a discount rate of 11.36% and a modest terminal growth rate of 2.5%, this provides a grounded 10-year DCF outlook. YETI’s strong brand loyalty, pricing power, and improving fundamentals make it worth watching. That said, investors should be aware of risks tied to consumer discretionary spending and potential margin pressures. At current levels, however, the margin of safety is compelling.

Overvalued Pick Of The Week

July 9, 2025

Amazon.com Inc

Amazon is a dominant business by any measure—there’s no question about that. With a 2024 return on invested capital (ROIC) of 20.4% and a weighted average cost of capital (WACC) of 7.75%, it’s still creating value for shareholders. But that doesn’t mean the stock is a buy at any price. And today, at $223 per share, it’s priced like perfection is guaranteed. Valuation models built on free cash flow (like Intrinziq's) don’t care about hype—they care about cash. Even assuming an aggressive 10.2% annual growth in FCF over the next decade, the fair value comes in at just $44.56 per share. That’s an 80% downside from today’s price. This will be an unpopular opinion—especially among retail investors who see a tech giant trading “below its highs” and assume that makes it cheap. But in reality, Amazon is still trading at a 100x multiple on free cash flow (depending on which number you use), and its FCF has been anything but consistent. After losing nearly $32 billion across 2021 and 2022, it rebounded to $32B in 2023, only to fall again to $20.8B in 2024. That’s not a smooth trajectory—it’s a warning flag. And that’s the core issue: to justify today’s price, you’d need to assume flawless execution, no major economic slowdown, and continued dominance across e-commerce, cloud (AWS), and AI infrastructure—all at once. For a $2 trillion company already stretched thin across multiple business units, that’s a very risky bet. Amazon may be a great business, but even great businesses can become bad investments when you overpay.

Stock Valuation Of The Week

June 23, 2025

Hims Hers Health Inc

Hims & Hers Health (HIMS) is at the center of attention this week following news that Novo Nordisk has terminated their short-lived partnership, citing legal concerns around the mass sale of compounded semaglutide products under the guise of personalization. This move immediately cuts off direct access to Wegovy via Hims' platform, triggering a sharp selloff in the stock. Despite the disruption, Hims has clarified that it will continue offering compounded versions of semaglutide through licensed pharmacies, a practice that, while legally gray, is not uncommon in the telehealth space. The larger concern now shifts to consumer trust and perception: will customers view compounded alternatives as equivalent to branded Wegovy, especially given the public scrutiny? Regulatory oversight could tighten, and any future FDA enforcement could directly impact this vertical. The company's business model remains vertically integrated, giving it a strong brand moat with high customer retention and cross-sell potential. However, its growing exposure to high-demand weight loss drugs introduces both opportunity and execution risk. The addressable market is large, but so is the scrutiny. Fundamentally, HIMS is now trading slightly above our estimated fair value of $42.76, with most of its upside already priced in. Still, the company has shown a major improvement in free cash flow, flipping from negative to $251M in 2024. Capital efficiency has also turned a corner, with a strong ROIC of 13.94% versus an 8% cost of capital — indicating value creation rather than destruction. Whether or not HIMS is a buy at current levels depends on your comfort with two key risks: (1) regulatory pushback on compounded GLP-1s, and (2) potential loss of credibility or user confidence if quality or supply issues arise. Long-term upside is tied to how well Hims can navigate this scrutiny and diversify beyond this high-stakes category.

Stock Valuation Of The Week

June 16, 2025

Lennar Corporation

Lennar Corporation (LEN) is one of the largest homebuilders in the United States, and at a current price of $108.64, it offers investors a compelling valuation opportunity. Based on a discounted cash flow (DCF) analysis, we estimate fair value to be approximately $160.07, implying an upside potential of 47%. This valuation is based on a projected free cash flow growth rate of 7.1% over the next decade—aligned with Lennar’s long-term trendline growth—and a discount rate of 7.1%, which represents our minimum acceptable return for this investment. Importantly, the model assumes a stable U.S. housing market, where demand continues to outpace supply, driven by favorable demographics, persistent underbuilding from the 2008 crisis, and structurally low housing inventory. Lennar’s business model includes both home construction and a growing focus on technology and services, such as its asset-light Lennar Multifamily and Lennar Mortgage segments. The company’s scale and vertical integration give it cost advantages that few regional players can match. This provides what we consider to be a narrow but meaningful economic moat—driven by operational efficiency, brand strength, and geographic diversification. Over the past several years, Lennar has demonstrated robust cash generation, posting multi-billion dollar free cash flows in 2020 through 2023. While FCF dipped in 2024, the overall trend supports our base-case growth projection. Additionally, Lennar has maintained a healthy balance sheet, with low net debt and strong return on equity, allowing it to reinvest during downturns and buy back shares opportunistically. That said, there are meaningful risks. As a cyclical company, Lennar is heavily exposed to interest rate fluctuations, mortgage affordability, and broader economic conditions. A sharp rise in interest rates or a sustained downturn in housing demand could reduce earnings power and depress FCF. Investors should also be aware of input cost volatility (e.g., lumber, labor) and regulatory risks tied to land use and zoning. To mitigate these uncertainties, we apply a 20% margin of safety to our valuation. This ensures that even if cash flow growth underperforms or macro headwinds persist, the investment thesis still holds. In summary, Lennar offers a rare combination of strong fundamentals, a reasonable valuation, and secular tailwinds in the housing market. For long-term, value-focused investors comfortable with housing cyclicality, LEN deserves serious consideration.

Overvalued Pick Of The Week

June 13, 2025

Tesla Inc

Tesla Inc. (TSLA) is trading at a massive premium to its intrinsic value. Despite a strong 5-year FCF CAGR of 47.59%, the fair value is estimated at $52.35, compared to the current price of $324.02—an 84% downside. Even under aggressive future growth assumptions (50.1% annually for 5 years), the valuation can’t justify today’s price.

Stock Valuation Of The Week

June 10, 2025

Lululemon Athletica

Lululemon (LULU) presents a compelling story of strong historical performance with a 5-year free cash flow CAGR of 32.65%, though its trendline growth rate of 8.21% suggests that future expansion may stabilize. This gap between historical and trendline figures reflects both the company’s earlier hyper-growth phase and the potential for a more sustainable pace going forward. Using a 10.5% projected growth rate and a 9.91% discount rate, our model arrives at a fair value estimate of $273.14, slightly above its current price of $258.50. This results in a modest 5.4% upside, factoring in a conservative 20% margin of safety. The terminal growth rate assumption of 2.5% reflects a steady long-term outlook in a competitive retail landscape. As trade-related uncertainties ease — particularly around tariffs — sentiment toward LULU should improve. If margin resilience holds and discretionary spending remains stable, the brand may continue to deliver consistent free cash flow. Still, investors should weigh the potential for normalization in growth against LULU’s strong brand equity and expanding international footprint.