Latest news with #freecashflow
Yahoo
11 hours ago
- Business
- Yahoo
Should PayPal be on my list of shares to buy?
On the face of it, PayPal (NASDAQ:PYPL) ought to be on my list of shares to buy. The company has a market value of $69bn and has generated just under $6bn in free cash in the last year. With minimal debt, that implies a free cash flow yield of almost 9%. That's pretty high considering the business isn't in decline – but there's a catch when it comes to the valuation. With no dividend, PayPal returns cash to shareholders via share buybacks. These work by reducing the outstanding share count, increasing the value of each of the remaining shares. Since 2020, PayPal's returned over $20bn via share repurchases. That's around 30% of its current market value and the returns have been going up. Year Share Buybacks 2024 $6bn 2023 $5bn 2022 $4.2bn 2021 $3.4bn 2020 $1.6bn Despite this, the company's share count has only fallen by about 13% over the last five years. That's much less impressive and it raises an important question for investors. PayPal's share count isn't really going down much despite the firm using almost all the free cash it generates to buy back shares. So where's the money going? A big part of the answer is stock-based compensation. This is where PayPal issues shares to pay its staff part of their salaries in the firm's stock, rather than cash. A lot of companies do this and I don't think there's anything intrinsically wrong with it. But it's something that investors need to factor into their calculations. Since 2020, PayPal's issued around $6.5bn in stock to cover these expenses. And this has gone some way towards offsetting the cash the firm's been using for share buybacks. In 2024, the company spent almost $6bn on repurchasing shares, but just over 20% of this was offset by stock-based compensation. So the outstanding share count only fell by around 6%. Stock-based compensation doesn't involve cash leaving the business directly. As a result, some investors tend to think it isn't a real expense. I however, think this is a mistake. Issuing equity automatically reduces the value of share buybacks and this is a key mechanism companies can return cash to shareholders. This is especially true when it comes to PayPal. Its 9% free cash flow yield's attractive at first sight, but the firm can't just use this to bring down its share count by that amount every year. Before it can start bringing down its number of shares outstanding, it has to buy back the ones it issued. And it has to do that with cash, making it a very real expense for investors. I don't think PayPal's stock-based compensation is a reason to dismiss the stock out of hand immediately. And the company's undergoing an interesting shift in terms of its priorities. Focusing on margins over revenue growth could boost profits and integrating further into the online transaction process could boost its competitive position. These are potential positives. For the time being though, I think there are better opportunities available. While the stock looks like a bargain at first sight, I don't think it's as attractive for me as it seems. The post Should PayPal be on my list of shares to buy? appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended PayPal. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Motley Fool UK 2025 Error while retrieving data Sign in to access your portfolio Error while retrieving data Error while retrieving data Error while retrieving data Error while retrieving data
Yahoo
2 days ago
- Business
- Yahoo
We Think That There Are More Issues For YOC (ETR:YOC) Than Just Sluggish Earnings
YOC AG (ETR:YOC) recently posted soft earnings but shareholders didn't react strongly. We did some analysis and found some concerning details beneath the statutory profit number. We've found 21 US stocks that are forecast to pay a dividend yield of over 6% next year. See the full list for free. As finance nerds would already know, the accrual ratio from cashflow is a key measure for assessing how well a company's free cash flow (FCF) matches its profit. To get the accrual ratio we first subtract FCF from profit for a period, and then divide that number by the average operating assets for the period. The ratio shows us how much a company's profit exceeds its FCF. As a result, a negative accrual ratio is a positive for the company, and a positive accrual ratio is a negative. While having an accrual ratio above zero is of little concern, we do think it's worth noting when a company has a relatively high accrual ratio. To quote a 2014 paper by Lewellen and Resutek, "firms with higher accruals tend to be less profitable in the future". Over the twelve months to March 2025, YOC recorded an accrual ratio of 0.56. Ergo, its free cash flow is significantly weaker than its profit. Statistically speaking, that's a real negative for future earnings. Indeed, in the last twelve months it reported free cash flow of €448k, which is significantly less than its profit of €3.06m. YOC shareholders will no doubt be hoping that its free cash flow bounces back next year, since it was down over the last twelve months. However, we can see that a recent tax benefit, along with unusual items, have impacted its statutory profit, and therefore its accrual ratio. Check out our latest analysis for YOC That might leave you wondering what analysts are forecasting in terms of future profitability. Luckily, you can click here to see an interactive graph depicting future profitability, based on their estimates. The fact that the company had unusual items boosting profit by €228k, in the last year, probably goes some way to explain why its accrual ratio was so weak. We can't deny that higher profits generally leave us optimistic, but we'd prefer it if the profit were to be sustainable. We ran the numbers on most publicly listed companies worldwide, and it's very common for unusual items to be once-off in nature. And, after all, that's exactly what the accounting terminology implies. If YOC doesn't see that contribution repeat, then all else being equal we'd expect its profit to drop over the current year. Moving on from the accrual ratio, we note that YOC profited from a tax benefit which contributed €361k to profit. It's always a bit noteworthy when a company is paid by the tax man, rather than paying the tax man. Of course, prima facie it's great to receive a tax benefit. However, the devil in the detail is that these kind of benefits only impact in the year they are booked, and are often one-off in nature. Assuming the tax benefit is not repeated every year, we could see its profitability drop noticeably, all else being equal. So while we think it's great to receive a tax benefit, it does tend to imply an increased risk that the statutory profit overstates the sustainable earnings power of the business. In conclusion, YOC's weak accrual ratio suggests its statutory earnings have been inflated by the non-cash tax benefit and the boost it received from unusual items. On reflection, the above-mentioned factors give us the strong impression that YOC'sunderlying earnings power is not as good as it might seem, based on the statutory profit numbers. So while earnings quality is important, it's equally important to consider the risks facing YOC at this point in time. To help with this, we've discovered 2 warning signs (1 shouldn't be ignored!) that you ought to be aware of before buying any shares in YOC. In this article we've looked at a number of factors that can impair the utility of profit numbers, and we've come away cautious. But there are plenty of other ways to inform your opinion of a company. Some people consider a high return on equity to be a good sign of a quality business. While it might take a little research on your behalf, you may find this free collection of companies boasting high return on equity, or this list of stocks with significant insider holdings to be useful. — Investing narratives with Fair Values Vita Life Sciences Set for a 12.72% Revenue Growth While Tackling Operational Challenges By Robbo – Community Contributor Fair Value Estimated: A$2.42 · 0.1% Overvalued Vossloh rides a €500 billion wave to boost growth and earnings in the next decade By Chris1 – Community Contributor Fair Value Estimated: €78.41 · 0.1% Overvalued Intuitive Surgical Will Transform Healthcare with 12% Revenue Growth By Unike – Community Contributor Fair Value Estimated: $325.55 · 0.6% Undervalued View more featured narratives — Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
4 days ago
- Business
- Yahoo
Ashtead Group PLC (ASHTF) Q4 2025 Earnings Call Highlights: Record EBITDA and Strategic Growth ...
Group Rental Revenue: Increased by 4%. Group EBITDA: Grew by 3% to $5 billion. Pre-Tax Profit: $2.1 billion. Earnings Per Share: $3.70. EBITDA Margin: 47%. Capital Expenditure: $2.4 billion. Free Cash Flow: Near record of $1.8 billion. Dividends Paid: $544 million. Share Buybacks: $342 million. New Customers Added: 42,000. New Locations Added: 61 in North America. North America General Tools Rental Revenue: Grew by 1% to $5.9 billion. North America Specialty Rental Revenue: Increased by 8% to $3.3 billion. UK Rental Revenue: Increased by 5% to $778 million. Operating Profit Margin: 25%. Interest Expense: $559 million. Adjusted Earnings Per Share: $3.70. Guidance for Fiscal Year 2026: Group rental revenue growth between flat and 4%. Planned Capital Expenditure for Fiscal Year 2026: $1.8 billion to $2.2 billion. Expected Free Cash Flow for Fiscal Year 2026: $2.0 billion to $2.3 billion. Warning! GuruFocus has detected 3 Warning Signs with XAIR. Release Date: June 17, 2025 For the complete transcript of the earnings call, please refer to the full earnings call transcript. Ashtead Group PLC (ASHTF) reported record rental revenues and EBITDA for the year, with group EBITDA reaching $5 billion and a margin of 47%. The company successfully added 42,000 new customers, contributing to $1.9 billion in rental revenue growth. Ashtead Group PLC (ASHTF) achieved near-record free cash flow of $1.8 billion, despite significant capital investments. The company launched a $1.5 billion share buyback program, demonstrating confidence in its cash-generative growth model. The Specialty business segment showed strong performance, with an 8% increase in rental revenue, and is expected to drive higher returns in the future. Total revenue was down 1% due to a planned lower level of used equipment sales, impacting overall profitability. The UK segment showed lower returns with an operating profit margin of only 8% and ROI of 7%, indicating room for improvement. The North American general tools segment experienced a decline in operating profit, attributed to lower gains on equipment sales and higher depreciation charges. The company anticipates flat to 4% rental revenue growth for the next fiscal year, reflecting ongoing market challenges. There is a noted slowdown in the Specialty segment's growth rate, with some areas like film and TV and oil and gas experiencing significant declines. Q: Can you provide an update on May trading and the current rental revenue guidance? A: Brendan Horgan, Chief Executive, noted that May saw a 2% increase in North America on a billing per day basis. The rental revenue guidance is expected to be between flat and 4%, with specialty business likely in the mid-single-digit range and general tool in the lower single-digit range. The UK is expected to be relatively flat. The growth is anticipated to be more back-half weighted due to factors like hurricane revenue in the first half of the previous year. Q: What are the opportunities for margin improvement and cost controls? A: Alexander Pease, Chief Financial Officer, explained that the company has taken actions to align its cost structure, particularly after significant investments during Sunbelt 3.0. The focus is now on leveraging these investments through logistics optimization and maintenance activities. Brendan Horgan added that the company is confident about margin progression over the course of Sunbelt 4.0, with a strong start in the first year. Q: How do you view the long-term split between general tool and specialty businesses, and will your M&A strategy reflect a greater emphasis on specialty? A: Brendan Horgan stated that the specialty business is expected to continue growing, potentially reaching closer to 50% of the total business over time. The M&A strategy will likely focus on specialty, given its robust landscape and potential for growth. However, the actual split will depend on market conditions and opportunities. Q: Could you elaborate on the market share gains and the impact of competitor disruptions? A: Brendan Horgan highlighted that Ashtead Group has been successful in adding new customers, with 42,000 new accounts generating over $400 million in revenue in the current fiscal year. The company is gaining market share across various customer segments, including large strategic accounts. Horgan did not comment on competitor disruptions but emphasized the positive impact of industry consolidation. Q: What is the impact of potential changes in bonus depreciation rules on free cash flow? A: Alexander Pease explained that reinstating 100% bonus depreciation could reduce cash tax by around 10 percentage points, translating to approximately $200 million in cash impact. This would be upside to the current guidance, which is based on the existing tax regime. For the complete transcript of the earnings call, please refer to the full earnings call transcript. This article first appeared on GuruFocus.
Globe and Mail
13-06-2025
- Business
- Globe and Mail
AEM's Solid FCF Places It on Firm Footing: Can It Fuel Future Growth?
Agnico Eagle Mines Limited AEM generated solid first-quarter free cash flow of $594 million, marking an impressive 50% increase from $396 million a year ago. The surge was backed by the strength in gold prices, disciplined capital spending and strong operational results. Notably, free cash flow before working capital adjustments reached $759 million, nearly double the amount from the prior year. The strong free cash flow supports investments in growth initiatives, including Canadian Malartic's underground expansion, Hope Bay and Detour Lake, as well as debt repayments and shareholder returns. AEM's strong liquidity position and substantial cash flows allow it to maintain a strong exploration budget and fund a strong pipeline of growth projects. It remains focused on paying down debt using excess cash, with net debt reducing by $212 million sequentially to just $5 million at the end of the first quarter. AEM also returned around $920 million to its shareholders through dividends and repurchases last year and $251 million in the first quarter. Agnico Eagle's robust free cash flow generation places it firmly in the upper tier of gold producers. This allows the company to pivot these funds into high-return growth initiatives, enhance returns and further accelerate debt reduction as the year progresses. Among its peers, Newmont Corporation NEM achieved a record first-quarter free cash flow of $1.2 billion, marking a significant turnaround from a negative $74 million in the same period a year ago. This substantial improvement came on the back of Newmont's enhanced operational efficiency and the strength of its Tier 1 portfolio. However, Newmont flagged several headwinds likely to impact second-quarter free cash flow, including the impact of non-core asset divestitures, which reduce cash-generating capacity, and a spike in tax payments due to increased profitability in earlier quarters and taxes from divestments. Barrick Mining Corporation B logged a free cash flow of $375 million for the first quarter, a nearly 12-fold year-over-year rise. The surge reflects Barrick's higher operating cash flows driven by an uptick in realized gold and copper prices. Barrick reduced net debt by 5% during the quarter, leveraging healthy free cash flow generation. The Zacks Rundown for AEM Agnico Eagle's shares have shot up 56.1% year to date against the Zacks Mining – Gold industry's rise of 49.7%, largely driven by the gold price rally. From a valuation standpoint, AEM is currently trading at a forward 12-month earnings multiple of 20.18, a roughly 50% premium to the industry average of 13.46X. It carries a Value Score of C. Image Source: Zacks Investment Research The Zacks Consensus Estimate for AEM's 2025 and 2026 earnings implies a year-over-year rise of 42.6% and 0.8%, respectively. The EPS estimates for 2025 and 2026 have been trending higher over the past 60 days. AEM stock currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. 7 Best Stocks for the Next 30 Days Just released: Experts distill 7 elite stocks from the current list of 220 Zacks Rank #1 Strong Buys. They deem these tickers "Most Likely for Early Price Pops." Since 1988, the full list has beaten the market more than 2X over with an average gain of +23.5% per year. So be sure to give these hand picked 7 your immediate attention. See them now >> Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Newmont Corporation (NEM): Free Stock Analysis Report Agnico Eagle Mines Limited (AEM): Free Stock Analysis Report Barrick Mining Corporation (B): Free Stock Analysis Report
Globe and Mail
02-06-2025
- Business
- Globe and Mail
Amazon Stock Is Up, So What is the Best Play Here?
Inc. (AMZN) generated positive free cash flow at a lower margin last quarter. However, analysts project higher sales, which could push its value higher. AMZN stock has been rising, so investors might be looking for a dip to buy in. One way to set a price target is to sell short out-of-the-money (OTM) put options in nearby expiry periods. That way, an investor can get paid while waiting for as lower buy-in price. This article will show how to do this. AMZN is at $206.39 in midday trading on Monday, June 2. This is well off its lows from late April, but still below peaks in February. Projecting Free Cash Flow from Last Quarter's Results In my last article on May 5 (" Amazon's Free Cash Flow Tumbles, So Is AMZN Worth Buying Here?"), I discussed the company's lower free cash flow and FCF margins. Here is a recap. Look at the table below, taken from its May 1 Q1 earnings release. Note that the results are from a trailing 12 months (TTM) perspective. It shows that although TTM has been rising, FCF margins fell more than its Operating Cash Flow (OCF) margins fell. The OCF fell from 18.2% to 17.5%, but the FCF margin fell from 6% to 4%. This is because the capex spending rose dramatically, $78 billion to $88 billion on a TTM basis. As a percent of sales, it rose from 12% to 13.5%. As a result, FCF margins fell. But this may not always last. Moreover, over the next year, analysts project higher sales. As a result, if OCF margins stay at 18% and capex spending stabilizes at 13%, its FCF margin could average 5% (i.e., 18% - 13% = 5% of sales). So, let's apply that to analysts' sales forecasts. For example, for the year ending Dec. 2025, Seeking Alpha reports that the average of 60 analysts is $694.9 billion. Note that's 7% higher than the TTM figure above of $650.3 billion in Q1. And for 2026, analysts project $762.28 billion (i.e., +17.2% higher than its TTM figure). So, on average, the next 12 months (NTM) run rate revenue forecast is $728.6 billion. So, let's apply a 5.0% FCF margin, to get a FCF forecast over the next 12 months: $728.6b x 0.05 = $36.43 billion NTM FCF That is $10 billion higher than the $26 billion it made over the trailing 12 months (see table above), or +40.5% higher: $36.43b NTM FCF / $25.925b TTM FCF-1 = 1.405 - 1 = +40.5% This implies the value of AMZN stock could be much higher. Target Prices for AMZN Stock One way to value AMZN stock is to assume that 100% of its FCF will eventually be paid out as a dividend. What will the dividend yield be? Well, its market cap today is $2.18 trillion, according to Yahoo! Finance. So, using its TTM $26 billion, the yield would be 1.19%: $25.925b TTM FCF / $2,180b mkt cap = 0.0119 Applying this to our NTM FCF forecast, and just to be conservative, let's use a higher FCF yield metric, say 1.25%: $36.43b NTM FCF / 0.0125 = $ 2,919.4 billion = $2.19 trillion That is 33.7% higher than today's market cap: $2,919.4 b / $2,180b -1 = 1.3368-1 = +33.7% That implies AMZN stock is worth 34% more: $205.59 price today x 1.337 = $275 p/sh Analysts tend to agree. For example, Yahoo! Finance shows that the average of 70 analysts is $238.96 per share. Similarly, Barchart's survey shows a mean price target of $240.69. In addition, AnaChart, which tracks the performance of analysts' recommendations, shows that 51 analysts now have a price target of $243.90. That is up from $228.16 as I reported in my May 5 Barchart article. In other words, analysts now see what I see - that its FCF could push AMZN stock higher. One way to play this is to sell short out-of-the-money (OTM) puts in nearby expiry periods. Shorting OTM Puts For example, the $200 strike price put options contracts that expire one month out (July 3) have a $3.97 midpoint premium. That strike price is 3% lower than today's price. The point is that an investor who enters an order to 'Sell to Open' 1 put contract can make an immediate yield of almost 2% (i.e., $3.97/$200 = 0.01985 = 1.985%). This means that an investor must secure $20k as collateral to buy 100 shares with their brokerage firm. But the investor immediately collects $397. As long as AMZN stays over $200 on or before July 3, the account will not be assigned to buy 100 shares at $200 (i.e., $20,000). But even if this happens, the investor's account has a lower breakeven point: $200 - $3.97 received = $196.03, or -4.65% below today's price of $206.39. The bottom line is that AMZN stock looks cheap here, and one way to play it is to sell short OTM puts. That way, an investor can set a lower buy-in target price. In addition, the investor can use this short-put income to buy in-the-money call options in much longer-dated periods.
