00:00:00
yesterday was a fairly strong day for
00:00:02
the market nearly green right across the
00:00:04
board and if we look at the fear and
00:00:06
greed index now we are sitting 42 moving
00:00:09
into neutral territory very shortly and
00:00:12
it wasn't long ago that we were sitting
00:00:14
on the boundary of extreme fear however
00:00:16
investor sentiment can change very
00:00:19
quickly and with earnings kicking off
00:00:21
this is what we want to take a look at
00:00:22
today where is the market how are the
00:00:24
companies performing and there a number
00:00:27
that we want to cover we're going to
00:00:28
look at 3M we're also going to cover
00:00:30
Proctor and Gamble as well as Johnson
00:00:32
Johnson that reported today and some
00:00:34
interesting news that we got from
00:00:36
Walgreens now Donald Trump was
00:00:38
inaugurated just a few days ago and
00:00:41
there is a lot of talk about tariffs how
00:00:43
they're going to affect the wider
00:00:44
economy and whether or not this will
00:00:47
cause some issues for the market and as
00:00:49
always we will keep up to date as and
00:00:51
when we hear now the first company we do
00:00:54
want to discuss is 3M which did have a
00:00:56
fairly strong earnings in fact the
00:00:58
shares were up as we will show you and
00:01:00
they had a 168 EPS with the market
00:01:03
anticipating 166 and their sales of 6
00:01:06
billion was very strong when we compare
00:01:09
the market wanted around 5.8 billion now
00:01:12
we can also take a look at other impacts
00:01:14
of the news and the first one that we do
00:01:16
want to talk about is that their
00:01:18
comparable sales as we can in fact see
00:01:20
did grow by around 2.1% year on year
00:01:23
something you need to understand with
00:01:24
this company it isn't fast growing and
00:01:27
over the longer term it has struggled to
00:01:29
really keep up in line with the 4%
00:01:31
inflation rate we continue to talk about
00:01:33
and organic sales alone were up around
00:01:35
1% nonetheless it was very strong in
00:01:38
comparison to what the analyst wanted
00:01:40
and we also see that in terms of the
00:01:42
full year they are anticipating around
00:01:44
760 to 790 which is actually in the
00:01:47
region of the 778 that the market wants
00:01:50
and ultimately when it first got
00:01:51
released yesterday the shares were up
00:01:53
around 4 and half% if we take a look at
00:01:55
the company well it is up around 36%
00:01:58
over the last year as noted over
00:02:00
yesterday it was up around 4% nearly at
00:02:03
5 and if you've been a longer term
00:02:05
shareholder of this company quite
00:02:07
disappointing you would be down 14% in
00:02:10
fact we can see alltime highs you'd have
00:02:12
to go back to around 7 years to day at
00:02:15
$259 and right now it is trading pretty
00:02:18
much at the upper end of the 52 we range
00:02:21
and that is
00:02:22
$150 we do however notice just one buy
00:02:25
rating today with Wall Street and they
00:02:27
do pay a dividend one that was cut not
00:02:29
too long ago and sits around
00:02:32
1.99% if you want to look at their
00:02:34
earnings on a historical basis well what
00:02:36
we do quite like to see is the 100%
00:02:38
track record they've outperformed over
00:02:40
the last four quarters but interesting
00:02:42
to note that the next quarter they do
00:02:44
expect quite a substantial drop to the
00:02:46
EPS with the subsequent three becoming
00:02:49
positive now they should give you faith
00:02:50
that they can based on their 100%
00:02:53
historical accuracy hit the 779 estimate
00:02:56
for 2025 which means right now their
00:02:58
forward PE does it around 18.9 and if we
00:03:01
were to take a look at this in relation
00:03:03
to the sector median it does sit lower
00:03:05
in fact if you're someone who has been
00:03:07
buying now you would be getting a 11%
00:03:10
discount to the overall comparative
00:03:12
however we do want to point out that the
00:03:14
5year average PE does sit around 15.5
00:03:17
meaning it is around 22% more expensive
00:03:20
than the average we can also show you
00:03:22
that based on dividend yield Theory this
00:03:23
does look to be overvalued remember this
00:03:25
tells us a company is undervalued when
00:03:28
the current yield sits above the 5 years
00:03:30
however one thing we would say is we're
00:03:31
not going to use this today on the basis
00:03:33
that they did cut their dividend so it
00:03:35
does seem to be unreasonable however
00:03:37
what we will pinpoint and we already
00:03:39
just discussed in terms of comparison
00:03:41
against the 5year average Triple M does
00:03:44
currently trade above that quite
00:03:45
significantly which can be a signal of
00:03:48
overvaluation in terms of looking at the
00:03:50
value this is what we want to do for
00:03:51
each of these companies today we see it
00:03:53
at
00:03:54
$148 which as you can see has been
00:03:56
derived from the DCF model now we've put
00:03:58
the numbers through the free cash flow
00:04:00
year onye where the average growth looks
00:04:02
to be around 1.4% year onye over the
00:04:05
period so we've gone 1% moving forwards
00:04:07
with the discount rate we get the
00:04:09
present value of future free cash flows
00:04:10
and terminal value add together with the
00:04:12
cash subtract total debt get to the
00:04:14
equity value divide by the shares
00:04:16
outstanding and we get to the 148 which
00:04:18
as we can see here in fact is around the
00:04:21
current value meaning that we believe
00:04:22
this company isn't trading at a discount
00:04:25
it's trading right in line with the fair
00:04:27
value now we do mention this because
00:04:29
typically on the the channel we like to
00:04:30
apply a 10% margin of safety we execute
00:04:33
on this if it meets the three golden
00:04:35
criteria wide Moe strong financial
00:04:37
metrics and good forward-looking data if
00:04:40
you believe that in today's episode
00:04:41
we'll abide around
00:04:43
$133 and we typically keep going to it's
00:04:45
near the current trading price but as it
00:04:47
is currently trading right now at its
00:04:49
fair value if you were looking at
00:04:51
something like 20% that would be around
00:04:53
the
00:04:54
$119 Mark we also noticed Wall Street
00:04:56
themselves believe very minimal upside
00:04:58
into the end of 2025 $152 price target
00:05:02
with upside of 3% and remember you can
00:05:05
grab a copy of this model by click on
00:05:07
the pin comment below running through
00:05:08
your own numbers whether it's for 3M or
00:05:10
any others we then move on to Walgreens
00:05:13
which was actually down around 10% after
00:05:15
the Department of Justice had a lawsuit
00:05:17
around opioids now we can in fact see
00:05:20
the department did announce they are
00:05:21
suing the company claiming that the
00:05:23
pharmacist filled millions of
00:05:25
prescriptions that actually lacked a
00:05:27
legitimate medical purpose and then sort
00:05:30
reimbursements from federal health
00:05:31
programs in fact it was down as much as
00:05:34
133% quite large news and if we are to
00:05:37
look at this right now it is trading at
00:05:39
a negative 1% and bear in mind the news
00:05:42
broke just yesterday if we look at over
00:05:44
the last week it is down around 14% now
00:05:48
over the last year nothing better down
00:05:50
50% over the last 10 years down 83% and
00:05:53
it is trading even at the lower end of
00:05:55
the 52- we range yet all three analysts
00:05:58
Wall Street seeking out for and Quant do
00:06:00
give this a hold now we can also mention
00:06:02
it does currently offer a yield of
00:06:04
around 7.99% and if we were to take a
00:06:06
look at the earnings itself well over
00:06:08
the last four quarters they've actually
00:06:10
beaten three or four 75% track record
00:06:13
but we need to make you aware over the
00:06:15
next four quarters they're anticipating
00:06:17
double digit decrease to the EPS for
00:06:19
every single quarter with essentially
00:06:21
the earnings per share estimate for
00:06:23
August 20125 giving it a forward p in
00:06:25
the 7 to 7.2 region if you were to take
00:06:29
a look at how that compares against the
00:06:30
sector median well that is a lot higher
00:06:32
bearing in mind a lot of risk with this
00:06:34
company it does currently trade at a 56%
00:06:37
discount and is around 9% lower than
00:06:40
what it typically trades for on a
00:06:41
forward PE in terms of the 5year average
00:06:44
and we can show you this again on both a
00:06:45
dividend yield perspective where it is
00:06:47
at 88.8% versus the 5year however this
00:06:50
carries risks amongst itself which we
00:06:52
have covered in other episodes deeper
00:06:54
Dives on Walgreens boots Alliance and in
00:06:56
terms of the forward p as we mentioned
00:06:58
just marginally lower than the 5year
00:07:00
which you could argue just in isolation
00:07:02
is an undervaluation signal however we
00:07:05
like to do a lot more than just look at
00:07:07
one model in terms of our intrinsic
00:07:09
value again from the DCF model you can
00:07:11
in fact see here we've used 5% maybe you
00:07:14
believe that is too optimistic but based
00:07:16
on that right now we see the intrinsic
00:07:18
value at just under $11 meaning very
00:07:21
similar to 3M we don't believe there is
00:07:22
a margin of safety again for those that
00:07:24
do want to see at 10% a buy at 964 at
00:07:28
20% around $ 850 7 but with no margin of
00:07:30
safety a very similar story for Wall
00:07:32
Street in terms of what we saw with 3m
00:07:34
they see limited of 4% only at the end
00:07:37
of 2025 price Target
00:07:40
$11.44 and as always do give us your
00:07:42
thoughts in the comments below now
00:07:44
before we continue we want to let you
00:07:46
know we have released our latest free
00:07:47
weekly article we drop one every single
00:07:50
Monday morning where we cover severely
00:07:52
undervalued stocks as well as what's
00:07:54
going in the market over the last few
00:07:56
days so click below you can sign up read
00:07:58
straight away where will be able to gain
00:08:00
access to 46 undervalued stocks for the
00:08:03
month of January lots of information the
00:08:05
upside That Wall Street themselves see
00:08:07
over the next year and on top of that a
00:08:09
recently released copy of 43 stocks that
00:08:11
Wall Street themselves believe right now
00:08:14
have the most upside in the S&P so click
00:08:16
below you can sign up and read straight
00:08:19
away we then move on to Proctor and
00:08:20
Gamble that actually released their
00:08:22
earnings before the market open today
00:08:24
and they did beat estimates as they put
00:08:26
it down to Shoppers buying more
00:08:28
household Stables if we are to take a
00:08:30
look at the actual numbers that they
00:08:32
have reported the EPS as we can see a
00:08:34
marginal beat 188 versus 186 and the
00:08:38
Topline Revenue as well they did have a
00:08:40
nice beat 2.88 versus
00:08:42
2.54 and we also noticed the net income
00:08:45
comes around 188 per share which if you
00:08:48
do compare it to the same quarter last
00:08:50
year it is higher and came in at
00:08:52
$140 on top of that something we did see
00:08:55
with other companies they are struggling
00:08:56
to increase it above inflation but their
00:08:58
net sales are up 2% and if you want to
00:09:01
look at just organic Revenue still
00:09:03
slightly under than the 4% we would like
00:09:05
to see coming in at 3% in terms of their
00:09:08
volume so they are saying more of the
00:09:09
products around 1% that is good to see
00:09:12
but again something just to bear in mind
00:09:14
and we can clearly see here Proctor and
00:09:15
Gamble have seen weaker demand for their
00:09:17
products after several years of
00:09:19
constantly increasing their prices
00:09:21
ultimately what this means is that
00:09:23
consumers are moving on to cheaper
00:09:25
alternatives but over the next full year
00:09:27
they do anticipate the same earnings per
00:09:30
share as what they had guided for
00:09:31
earlier around 691 to 705 with Revenue
00:09:34
growth fairly small between 2 to 4% in
00:09:37
terms of their news they are up around 3
00:09:39
to 4% today with the market just open in
00:09:42
terms of over the last year up only 9%
00:09:44
over the last 10 years up around 92%
00:09:47
they have underformed the S&P trading in
00:09:49
the midpoint right now of the 52e range
00:09:52
with Wall Street giving this company a
00:09:54
buy rating and we can see they do
00:09:56
currently offer a yield of around 22% in
00:09:59
terms of their earnings it does look
00:10:00
good when we see green right across the
00:10:02
board meaning they anticipate growth
00:10:04
although fairly marginal over the next
00:10:06
four quarters with a 100% track record
00:10:09
and if we look to June this year and the
00:10:10
EPS Target that does give their forward
00:10:13
PE right now just marginally above 23
00:10:16
which is lower than the S smps 25 if we
00:10:19
compare it though it is at a premium
00:10:20
against the sector median in fact you
00:10:22
are paying 44% more but if we actually
00:10:25
compare it to their 5year average it
00:10:27
does come in slightly under by around 5
00:10:29
5% and based on dividend yield Theory
00:10:31
given the yield isn't far off the 5e
00:10:33
this is a reasonable signal and we also
00:10:35
note here given the forward PE of 23
00:10:37
slightly below the 5year a marginal
00:10:39
undervaluation signal but ultimately
00:10:41
when we do run it through the valuation
00:10:43
at
00:10:44
$181 it is just the average of these
00:10:46
three models we can in fact see at a 10%
00:10:48
margin of safety you would need to wait
00:10:50
for
00:10:51
$163 so right now proor and gamble
00:10:53
sitting somewhere between 5 to 10% with
00:10:56
Wall Street their buy rating they see
00:10:58
this company at 100 $90 at the end of
00:11:00
the year which does translate to 14%
00:11:02
upside we then move on to divid and King
00:11:04
Johnson Johnson that actually beat on
00:11:06
their quarterly sales as well as their
00:11:08
profit estimates and that is a very good
00:11:10
sign we have had some struggles with
00:11:12
this company especially in terms of
00:11:14
their share price and we can see they
00:11:16
expect their 2025 sales to come in
00:11:18
around 91 to 92 billion and the EPS
00:11:21
around 1075 to 1095 analy we pretty much
00:11:25
expecting something similar although on
00:11:27
the earnings per share they are are
00:11:29
anticipating a little bit higher than
00:11:30
what the market wanted to see in terms
00:11:32
of the actual sales though it is nice to
00:11:34
see above inflation up around 5.3% and
00:11:37
one of the drivers of their revenue from
00:11:39
this latest quarter is their Cancer
00:11:41
drugs up 19% worldwide driven by more
00:11:44
than 3 billion for multiple treatments
00:11:46
as we can see we can see right now it is
00:11:48
down around 4% on the earnings over the
00:11:51
last year down 12% over the last 10
00:11:53
years 39% trading pretty much near its
00:11:57
52 we low with a double buyer rating
00:11:59
from both Seeking Alpha as well as Wall
00:12:01
Street and a fairly attractive starting
00:12:03
yield for this dividend King at
00:12:05
3.37% if we were to take a look at their
00:12:08
earnings again understand they are
00:12:10
expecting some decreases over the next
00:12:12
few quarters over the last four though
00:12:14
they have continued with that beat upon
00:12:16
beat 100% track record and December 2025
00:12:20
with the EPS estimate it does give their
00:12:22
forward P right now just below 14 and if
00:12:25
we were to compare that significantly
00:12:27
low on the sector of 21 meaning you are
00:12:29
getting a 30% discount but also
00:12:32
significantly low than their 5year
00:12:33
average of around 10% and we can show
00:12:36
you on a graphical basis severe
00:12:38
undervaluation both the yield above the
00:12:40
5year the forward p as well 14.8 below
00:12:43
the 5year 16.4 so that is what we would
00:12:46
say as a double severe undervaluation
00:12:48
and when we look at our intrinsic value
00:12:49
at
00:12:50
$174 we can in fact see a fairly decent
00:12:53
margin of safety at 15% bu 148 we can
00:12:56
see if it comes around $140 you are
00:12:59
getting a 20% MOS but right now at least
00:13:01
15% with Wall Street themselves seeing
00:13:04
22% upside their price target of
00:13:07
$174 and this might be the most obvious
00:13:09
buy out of the four that we have run
00:13:11
through today and we will continue to
00:13:13
look at earnings as they come through
00:13:15
not just this week but also the next few
00:13:17
months also don't forget to sign up to
00:13:19
the free weekly news lettera we are
00:13:20
dropping one every single Monday grab
00:13:22
those spreadsheets and also come and
00:13:24
join us in the patreon where we do cover
00:13:26
our weekly buys and sells as always have
00:13:28
a great a great day and we'll see you
00:13:30
all on the next one
