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Season 1, Episode 12 · 1 year ago
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Season 1, Episode 12 · 1 year ago
Growth investing - Paypal and Square
ABOUT THIS EPISODE
Welcome to stop talk by small capmillionaire where ordinary people make extraordinary gains. This is and stopmarket education, podcast that focuses on stock market and company analysts.This podcast is for education purpose and should not be considered asinvestment or stock advice. This podcast focuses on stock in westmantideas and we employ independent thinking and unbiased opinion for moreinformation on our strategy of stock andlessness visit, www dot, small capmillionnaire com, or check out ourbook small cat millonnaire on Amazon. Youcould also look at a free course on Yeudemi called a stock talk that weoffer. Thank you for listening and...
...please subscribe for wikly investmentideas. We are present on spotify apple podcast or Google, podcast Hallo, everywen, todays, nineteenthAppril, two thousand and twenty, and welcome to this podcast. Today we aregoing to discuss about an approach of investing colldus growth investing. Sowhat is growth? Investing growth in worsting is an investment style andstrategy that is focused on increase in investors, capital, so you're trying to grow your capitaly growthinvessors, typically invest in growth stock. That is companies whose earningsare expected to increase at an above average rate as compared to theirindustry and overanl market. So Groth companies are companies that growfaster than the werld market, as well as their industry. Growth. Investing ishighly attractive to many investors,...
...because buying stocks and emergingcompanies can provide impressive returns. If the companies aresuccessful. However, such companies are untried and thus often pase a fairlyhigh amount of rest, so growth investing is all about findingcompanies that are growing or have potential to grow faster than themarket, so how to identify growth companies sofirst thing to focus on as the industry, so the industry that they are workingin should have a potential of growth. It is not saturated, so futurepotential for the industry looks goort. Growth companies have a higher P ratiothan sp five hundred that, as also a potential marker for finding out growthcompanies. Growth companies have growth rating revenues that are more than ASPfive hundred average. So whatever the overall growth rate of revenues inspfive hundred or overall market is...
...there, growth companies are growingfaster than that they have highr return on equity generally more than tenpercent and growth companies have a potential to earn increase earnings andfree cash flow. So the estimate of future predictions for the earnings, aswell as free crash flow, is that they are going to increase it. So I'm goingto discuss today about a sector called US Phintech and specifically infint ectpayment processing sector. So my overall investment themashardcash users has been going down for a number of years now so amount of hardcash that we use has been going down, and this has been accerated by covidnineteen. Now people are afraid of using cash because you don't know whohas tust that cash and there is potential spread of wiris because ofcash being used by multiple venders or...
...muntiple people. So the amount ofhardcast that we are going to use has gone down, and that has acton that iseven more accelerated because of cuvid nineteen, specifically, I have seenstores in my area my grocery stores, or even you know, point of sales. Restaurants,takeout restaurants, that are stop taking cash, they're, insisting ononline payments, or you know, point of contact payments. So what we are goingto see, what is the fall back? What is a fall out of this covid nineteen virus?So they're going to be more online transactions? There is going to be moreonline business revenues. We have all working from home, so we aretransacting more online and there is. There is change in regulation to so, specifically in United States, twocompanies called US Square aspnd people. They have been granted permission todisberse loans, as well as to hand out...
...the payments that the government isgiving to support payment, that the government is giving papall as well assquare has been a proof to give Ur those payments and that's a bigregulation change earlier. Only banks were allowed to give out governmentpayments, but now even Phintech forms have been approved to give up payment,so the regulations are changing to and one more factors more than twentypercent of American populations who file taxes do not have a bank accountso only way to reach these individuals, who don't have a bank account isthrough these kind of Fintech forms, so the penetration of banking, mainincrease, and especially in developed world developing world. It has greatpotential to increase further. So I am going to discuss two companiestoday. One is paper holding which operates as a technology platformcompany that enables digital and mobile...
...payments on behalf of consumers andmerchants. Company offers online payment solution, people holding servscustomers worldwide. So it has not only US presence, but it is present all overthe world people transact millions of payments at digital speed. The companyenables individuals and merchants to electronically transfer money by anumerous methods, with payments originating from a customers, bankaccount credit card or peopl account. So it enables you to connect all three.You can connect a bank account with a papall account. You can have a separatepapal account or you can have a credit card that is linked to your people.Account people is a giant in online payment industry with nearlyst two.Seventy million active accounts, including twenty one million merchantaccounts across more than two hundred market. It earns fees from paymenttransactions for an exchange and with...
...dravels from foreign bank accounts, aswell as from interest on consumer balance and people, brandit credit anddebit cards, the form processes, approximately ten payment, transactsten payment transactions a year, the US account for more than half of Papall'stotal revenue. So fifty percent is international revenue for people. Fiftypercent is domestic US revenues for paper. Nukey features about that stock. Thestock the current prize is around. Eighty two. Fifty two week high hasbeen around undred n twenty four. So it is nearly forty percent down sinceforty dollar down since its peak prize of une twenty four p Raceis, currentlyfifty one so one more potential thing: SP five hundred P races around twentyfive minutes. It's in the range of two thusand ynd to twenty five. This formhas a prage of fifty one citis twice as...
...high as ACP FI wented. It's a potentialmarker for a growth company highest it has ever been is sixty two in the lastthree years, lowest p ratio is around thirty five in two thousand andnineteen it was trading around the Pragh of thirty. Five. Current earningis two point, one nine. Now this is important. Even with this Korona viruseting everyone, the estimated earnings, are expected to increase. So analystare estimating earnings of people earning per share of people to go upfrom two point: one: Nine dollars to three point: one: Seven dollars: so aone dollar jump in earnings, insider holding, has seen up a scene, anincrease of nineteen point, nine four, so who are insiders? Insiders, aureemployees and management of the company, so insider holding has seen a bump ofnineteen percent, almost twenty percent. So a lot of insiders have bought thisstock in last six months. That's a good...
...sign, because if you're a management-and you believe in this company, then you would buy it. Returnal equity is fifteen point twopercent, which is higher than our expected mentsar estimate of tenpercent. So we believe that broth companies Showan Roe the more than tenpercent, so it qualifies in that cashper share is three point: two ninethat is gid. I genderates free cash deat to assets, ten percent, which isexcellent and dead to equitiis thirty, two per cent, which is not too bad tothree years. Average growth in US revenue is around eighteen percent andinternational revenue growth around eighteen percent again and one moreimportant factor. Eighty six percent of an list right now are recommending a byon this stock because they see a potential increase in earning per shareand most of the companies are going to struggle with earning per share, butpapall is expected to increase its...
...earning por share. Now, that's a veryexcellent sign, so I feel a growth investor. You could look, you could addpeople into your watch list even with current P RAC of fifty one, which isvery high. If you do not have any exposure to this talk, you could lookinto it or I would wait for a drop in market to get into the STOFP, but in mywatch list for sure the next company that weare going todiscuss this square ink so squaring provides mobile payment solution. Thecompany develops point of sales, software that helps and digitalreceives, inventory and sales report, as well as offer analytics and FeedbackSquare also provides financial and marketing services. So, if you're usingany bakery in United State, most of them have square provided hardware,it's a card reader software to...
...merchants and other financial providersthat enables them to accept credit card point of sale, transaction squaresoftware handles the backend of transaction, making sure accountssquare up between the merchants, the card, companies, banks and everythingthey charge a standard fee of two point: Seven: five percent per transaction, anearly provider of mobile payment equipment and Software Square phaces,competition from established player like Wis and Master Card, and also withtech companies. Key features of square fifty two weekof fifty to week, high for this stock, has been eighty seven current prize issixty one cortictrading twenty ar below it's fifty two week, high P ratioisaround hundred. That is way above people, and that is even way above Sp.Five hundred riturn on equity is twenty six point. Five percent, which isamazing, generates three cash of one...
...dollar per share. Earning per share iszero on zero sex, current earning, which is expected to grow around fivetimes so expected earning per shares, Zero Pont, five, two, so more than fivetimes or approximately nine times its earning is going to grow. Deat to assetis twenty. Three percent debt to common stock is sixty two percent three yearsaverage growth in US thirty, nine percent international growth. Fiftypour percent EPS has been growing for last three years at the rate of fortypercent and all the analyst believe that that growth rate is going tosustain forty. Eight percent of analyst right now recommend pying Theis stop.So we have discussed two growth stories, papal a which is the more establishedpal and playr and square, which is a new newer kind of startup as comparedto paper now. squarish son Man Square...
...has shown more growth, but it is prizedaround hundred pree. So it has to maintain that growth to justify justifythat prize. Earning right. Papall has been priced around fifty one P, whichis also very high, but it is growing at a slower rate, so that justifies somekind of drop in Pi Isornin valuation. So if you're, a growth investor, youtry to find such themes. Overall industries growing companies areshowing lot of growth like forty percent tearnings growth in square inlast three years. That's an amazing thing, so you're looking out for suchgrowth stories. So thank you for listening and followus for weekly updates on different stocks.
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