The Moscoe Group’s Post

Innovative Solution And Support Stock: Growth And Margin Expansion Potential

What influences an exiting investor’s decision-making? A great guest article from our editorial board member, Ricardo Jimenez Hernandez, who shares insights on why IROs need to think more about the selling of their stock and not just the buy. Read the full piece below!

Excited to share how EPS can benefit small companies! 🚀 Here are the steps: 1. Understand the basics: EPS (Earnings Per Share) is a key financial metric that reflects a company’s profitability per outstanding share of its common stock. 2. Calculate earnings: Determine the company’s net income by subtracting expenses from revenue. This is the earnings available to shareholders. 3. Consider outstanding shares: Divide the net income by the total number of outstanding shares to calculate EPS. 4. Analyze the results: A higher EPS indicates higher profitability on a per-share basis, which can attract investors and increase stock value. 5. Communicate effectively: Share your company’s EPS results with stakeholders to demonstrate financial health and growth potential. #SmallBusiness #FinancialMetrics #EarningsPerShare #GrowthStrategy

𝐓𝐡𝐞 𝐏𝐨𝐰𝐞𝐫 𝐨𝐟 𝐒𝐡𝐚𝐫𝐞 𝐁𝐮𝐲𝐛𝐚𝐜𝐤𝐬 One of the pillars of capital allocation is share buybacks. It provides management with the possibility to further improve returns for shareholders. Even though there are some limitations regarding share buybacks, such as overpaying for shares or buying shares of structurally decimated businesses, investors are very keen on this remuneration. It is not difficult to imagine why investors like share buybacks. Just look at the table below (source: Mohnish Pabrai's presentation). You can massively benefit with or without multiple expansion or earnings growth. If the market never re-rates a company, it can re-rate itself by aggressively buying back its cheap shares. However, the real magic starts when all three engines work in your favor (share buybacks + earnings growth + multiple expansion). If you need an example of this strategy, start with Autozone.

Share buybacks can be a useful part of capital allocation. I’m not sure that I’d place them quite as highly as the original poster here though. They have their place. They are not always the right answer, and they can also range from a bad idea to be an unsustainable way of faking true growth.   Earnings growth is an “engine” (to use the language of the referenced post), generated by operating the business well and delivering on strategy. Earnings growth generated by high and stable (or better, increasing) RoE is an efficient engine.   Multiple expansion is what happens when growth prospects increase, risk decreases, risk free rates decrease (or at least the external perception that these things are real). Management cannot control this rating, but demonstrating likely future growth with managed risks may translate into multiple expansion.   Dividend payments on the one hand reflect discipline of returning capital to shareholders and demonstrating that profits are "real" (aka free cash). Dividends may temper future earnings growth but can sharpen RoE when management runs out of high RoE investments. Dividends can therefore can also signal a lack of investment opportunities. That can be one reason management teams may not want to declare dividends.   Of course, cutting dividends sends mixed signals at best, and terrible signals at worst. It doesn’t necessarily make sense that variable dividends are viewed differently from variable share buybacks, but it seems they still are.   Dividends have the benefit of benefitting all shareholders equally whether the share price was fair or not.   Share buybacks make sense when: A) management does not have better uses for the capital, B) prefers buybacks over dividends for messaging reasons C) believes their share price is undervalued and have not been able to unlock this value for shareholders or convince the market that the value is there.   Of course, management is never optimistic about their own fortunes and abilities, and their remuneration is never linked to EPS.   The EPS boost from share buybacks is temporary. It arises from the specific share buyback. If continued, it may fool some investors into thinking earnings are really growing, but as soon as the buybacks stop, this "engine" will sputter and fail. The idea of a 99% share buyback raises more questions about the plausibility of the assumptions than it should be taken to imply a path to 50x returns.

Basic Questions on Share price of Company: 1)What is the book value of company - Book value is the difference between a company's total assets and total liabilities 2)What is the book value per share- Value per share based on the net assets the company have. 3) What is the Market value of company- How much an asset or a company is worth on the financial market, according to market participants. 4)Why there is difference in book value and Market value of share- The book value is different from the market value because the market value takes into account factors such as future earnings potential when determining the price of a stock. The book value is generally limited to the costs of the assets and liabilities in books of company. 5)Why Market price is more than book value - It indicates that investors and shareholder believe the company has excellent future prospects for growth, expansion, and increased profits. 6)When a company's book value is higher than its market value. What is representing- It can indicate that the stock is undervalued, and that investors may have lost confidence in the company. This could be due to a number of factors, including business problems, poor economic conditions, or investors misvaluing the company.

#Investment_decision_Matrix A business is performing well. You buy the stock. The stock does not move. The business keeps performing well. You add more. The stock does not move. You start questioning your decision. The business keeps performing well. The stock does not move. Now your entire focus has shifted to the stock. You no longer care about the business. You start bad-mouthing the stock. You sell it and move elsewhere. Then the stock blasts and doubles in no time. You develop regret. You realise that you should never have left a good business. The chart distorted your reality. This is a very common story among retail investors.

Shares, also known as stocks or equity, represent units of ownership in a company. When you own shares of a company, you own a portion of that company proportional to the number of shares you hold relative to the total number of shares issued by the company. Owning shares provides investors with potential benefits such as dividends and capital appreciation, but also comes with risks, including market volatility and the possibility of losing the invested capital. . . . . 👉Follow Anjali K. for more much content. 👉Please Like, Comment, and Repost if you found this post insightful.☺️

What makes a 100-bagger? In this visual, we break down the return, revenue and EBIT growth, margin development, and multiple expansion or contraction for each of the 15 best performing stocks over the last 15 years.

In order to enjoy 100-Baggers, you need to buy-and-hold single name stocks for the long run (no “rebalancing”) at least for 10 years - but most of the time for more than 20 years. If you own an index you’ll be rebalanced away from those gains. For outsized returns, approach portfolio construction like you would a VC portfolio.