I recently started a new little project on Substack, where I do short snap judgements on stocks selected by you, the reader. Below is the first edititon of ValueTeddy’s Snap Judgements.
For the first edition of this little project I’m taking a look at Inari Medical and JOYY.
Market Cap 5333 m USD
Revenue 139 m USD
First of all I note that they have Medical in the name, which is way outside my circle of competence. I also note that it seems like they IPOd in May 2020.
Next step is to try and figure out what they do. This is cut from the lates 10Q: “Inari Medical, Inc. (the “Company”) was incorporated in Delaware in July 2011 and is headquartered in Irvine, California. The Company develops, manufactures, markets and sells devices for the interventional treatment of venous diseases. The Company received initial 510(k) clearance from the U.S. Food and Drug Administration (the “FDA”) in February 2015 for its FlowTriever system, used primarily to treat pulmonary emboli, and in February 2017 for its ClotTriever system, used for the treatment of deep vein thrombosis.”. In other words, medical stuff. I have no idea regarding this so we are moving on to the financials.
First of all I note that the balance sheet is in VERY good shape, and they are loaded with cash on hand. The liabilities totals 14m and the total assets are 205m, of which 168m is cash.
Moving to the income statement (all figures are for the nine months 2020 and 2019) I note that revenues tripled, from about 31m to 91m. I also note that they crossed the line from a operational loss of less than 1m to operational profits of 11m. Net profit is just shy of 7m.
This is very impressive. growing revenues by 3x while operational costs only doubled is a very good sign, and I do not see any oddities that would cause me to be suspicious.
Moving on to the cash flows, about half of the net income seems to end up as cash (3.5m) which is an improvement from a net cash burn of -4m. Almost all of this cash is used to purchase pp&e. We also get an explanation of the huge cash pile, which seems to be from the sale of shares related to the IPO. Some of those proceeds seem to have gone to repaying 30m of debt. I fail to see anything odd or questionable here.
So with that aside, lets move to valuation. EV/EBITDA seems to be 270, P/S 38, and a P/E of not so shy 405. Assuming revenue per share triples again, we land on a forward multiple of 12x sales. This is a pass for me, 90% because its in medical stuff, and 10% because of valuation. It is however incredibly interesting and worth a look if you feel confident investing in medicals. Note that this is priced for incredible growth in the years to come, in my humble opinion.
Market Cap 186B USD
Revenue 3.9B USD
This looks to be a Chinese entity listed in the US, which is categorically a hard pass for me personally. The main reason is that I am not comfortable investing in companies where I don’t feel that I can understand the financial reports very well. However, I note steady increase in revenue per share, and in earnings per share. This company description cut from Börsdata makes me wanna think about this as ZOOM in China: “JOYY Inc., formerly YY Inc. (YY), is a social platform that engages users in real-time online group activities through voice, video and text on personal computers and mobile devices.“. I am in no way familiar with the services they offer, listed on Börsdata as: “It owns the domain names of YY.com, Duowan.com, 100.com, Huya.com, Edu24ol.com and Zhiniu8.com. The Company’s YY platform, including YY.com “. This is too far out for me to be able to understand the company in any good sense. The company does however seem to have incredible growth during the last 10 years, and they are priced for continued great growth. According to Börsdata the 10yr cagr in revenue per share is a whooping 50%, and with a P/S ratio of 47 this growth is expected to continue. This is not a stock for me, but if you have some insight into China then maybe this is for you.
*EDIT* Apparently the data I used is not accurate for JOYY, the market cap is significantly lower, roughly 8 B, and the company description has apparently changed. The Chinese parts of the business are divested and they are now mainly providing streaming apps in the south eastern parts of Asia.
That’s it for now. I hope you found this interesting and maybe there is some takeaway from me sharing a little bit of my process. Note that nothing here is investment advice, and I am not your financial adviser. If you liked this and want to suggest stocks for the next edition, please tweet @ValueTeddy.
Have a great weekend!