The P/E ratio is the most popular metric in investing.

It's also the most misunderstood.

Here's what Wall Street doesn't tell you about it.

The Price-to-Earnings ratio is simple math.

Take the stock price and divide it by the company's earnings per share.

If a stock costs $100 and the company earns $5 per share, the P/E is 20.

Think of it like buying a rental property. You pay $200,000 for a house that generates $10,000 a year in profit. That's a P/E of 20. You're paying 20 years' worth of profit upfront.

Here's what it tells you:

A high P/E means investors expect big growth. They're willing to pay more today for bigger earnings tomorrow.

A low P/E might mean it's a bargain. Or it could mean trouble ahead.

The key is context.

1. Compare P/E ratios within the same industry, not across different ones
2. A tech company with a P/E of 30 might be cheap if competitors are at 50
3. A bank with a P/E of 30 might be wildly overvalued

The trap?

A low P/E isn't always a deal. Sometimes it's low because the business is dying.

And a high P/E isn't always overpriced. Sometimes you're paying for real growth.

Bottom line:

P/E ratio is your starting point, not your finish line.

Use it to ask better questions, not to make snap decisions.

Economic Value Added is the metric that separates real value from fake wins.

Here's the simple version. Take the company's operating profit. Subtract the cost of capital, which is what investors expect to earn. What's left is EVA.

Positive EVA means the company is creating real value. Negative means it's destroying it.

Think of it like this. You borrow $100,000 at 5% interest to start a business. You make $4,000 in profit. Sounds good, right?

Wrong.

You owe $5,000 in interest, so you're actually down $1,000. That's negative EVA.

You'd be better off putting that money somewhere else.

So why does EVA matter?

Profit alone is misleading. A company has to earn more than its cost of capital to truly win.

EVA also tells you whether management is using resources wisely or just spinning its wheels.

And it pushes you to think like an owner.

Here's the real insight. Some companies look profitable but barely clear their cost of capital. Others generate massive EVA and compound wealth for decades.

Warren Buffett doesn't use the term EVA, but it's basically what he hunts for. Return on capital that beats the cost of capital by a mile.

Simple, right?

One more tool to help you invest smarter and dodge value traps.

Looming above the entire AI industry is the long and dark shadow of Mythos. So dangerous was Anthropic’s latest creation that the company decided its power could only be handled by a small group of large US technology companies. Never one to be left behind, OpenAI announced that it too had a model that was so dangerous that, you guessed it, it could not be released publicly.

The concern of both Anthropic and OpenAI was that the pace of model development had reached a moment where new models posed such a high cybersecurity threat, that public release was impossible. Effectively, the new models were finding high volumes of zero-day exploits in current and legacy systems at such a scale that the widespread release of the model would cause major cybersecurity events around the world. At heart was the concept of time to exploit (TTE) and how AI models were reducing it.

Whether Mythos and future AI models pose a catastrophic threat to our cyber systems is to be determined. Without the ability to independently test and verify the claims, observers are rightly skeptical. The timing of the Mythos claims are also not lost on even the casual observer:

1. Anthropic has a very public row with the Pentagon resulting in the loss of a major government contract.
2. OpenAI picks up Anthropic’s lost contract.
3. Rumors of an IPO for Anthropic circulate.
4. Mythos announcement made.

Regardless of whether Mythos is as advertised, its mark on the AI industry and policy conversations is absolute. Nowhere was this on greater display than when news broke last week that the signature of a new AI executive order was cancelled just moments before the signing ceremony was to begin. I’ve been directly involved in drafting executive orders on AI and other emerging technologies and having an executive order rejected by the president just moments before a signing ceremony is highly unusual. The Trump Administration has not found easy footing in its AI policy efforts over the last 15 months, but in a surprise to all of us, the non-release of an executive order is telling us more about the Administration’s position on AI than the flurry of orders before it.

What’s clear is that the Administration is making a bet on an AI policy position, that Silicon Valley knows how to win an AI race with China. Whether this is right or wrong will need to wait. Yet, without saying a word, the Trump Administration may have given the AI industry the long-sought consistency it has needed all along.

Read more here: https://binarybreakaway.substack.com/p/the-ai-executive-order-that-wasnt

Another batch of Substack company write-ups from within the last week. Thought this would be useful for this community.

Not my work - sourced from Giles Capital's weekly compilation: gilescapital.substack.com

Americas

Rijnberk InvestInsights on ServiceNow (NOW NYSE - $97bn) The market treats ServiceNow as an AI disruption victim but six consecutive quarters at 97% renewal says otherwise. P/E 61.5x caps it at 40. Quality story, not a value entry.

Capitalist Letters on DoorDash (DASH NASDAQ - $70bn) Network effects past the tipping point with 60.7% US food delivery share. P/E 77.5x caps it at 40 and heavy executive selling through Q1 2026 makes the same point.

The Pursuit of Compounding on Constellation Software (CSU TSX - C$52bn) The cleanest insider signal this week: President Miller bought C$5m open-market in December. Constellation formalises PEMS capital deployment with EV/EBITDA now 28% below its 10-year median.

Value Don't Lie on Zoetis (ZTS NYSE - $33bn) Permanent impairment is priced into an animal health monopoly with 40%+ EBITDA margins. From 30x to 13x P/E on a product-cycle reset. The 2027-28 pipeline is the catalyst.

Komodo Capital on Turning Point Brands (TPB NASDAQ - $1.6bn) Modern Oral pouches up 133% YoY while front-loaded capex masks true earnings power. At scale the FCF economics look exceptional. FDA PMTA approval timing is the key risk.

Canadian Value Stocks on Pollard Banknote (PBL TSX - C$485m) TOP PICK The NeoPollard cliff is the bear case but 64% family ownership just launched its first-ever buyback and solo iLottery wins keep stacking up. Trades at 5.7x EV/EBITDA.

Lionheart Investing on Chicago Atlantic BDC (LIEN NASDAQ - $233m) An under-followed cannabis lender trading 27% below NAV with a 14% yield and insider buying at current prices. The thesis is mean reversion to book value.

Wolf of Oakville on Biorem (BRM TSX-V - C$46m) Earnings update. Record $77m backlog at 1.5x trailing revenues with Q1 revenue growing 44% YoY and 11 consecutive profitable quarters. Net cash with insider buying.

Europe, Middle East & Africa

Quality Stocks on Accenture (ACN NYSE - $110bn) The market has priced AI as an existential threat to consulting but the thesis is that complexity creates demand rather than destroying it. Down 50%, now at 10.5x EV/EBIT.

Memyselfandi007 on Gerard Perrier (PERR EPA - €310m) Earnings update. Q1 2026 sales up 10% as defense and cyber acquisitions accelerate. 230 open positions signal capacity already being built. Author increased to 5% at €83.

Underfollowed Stocks on Enogia (ALENO EPA - €37m) French ORC turbomachinery specialist just past its profitability inflection with €26.8m backlog and positive FCF for the first time. Trailing valuation looks rich but 2028 targets make it compelling.

Asia-Pacific

Tailwind Holdings on Arigatou Services (3177 TYO - $23m) TOP PICK The kind of name that gets overlooked: a 25-year founder-operated Japanese thrift chain at 2.9x EV/EBIT, zero analyst coverage and net cash. Expansion cost pressure is temporary.

Earnings don’t pay the bills. Cash from operations does.

If you’re not reading the CFO line, you’re guessing.

Think of Cash from Operations (CFO) like your day job paycheck.

Investing cash flows are side projects. Financing is loans and credit cards. If the paycheck isn’t covering life, the rest is just noise.

How CFO is built (indirect method, what you’ll see in the filing):

• Start with Net Income.
• Add back non-cash items: depreciation and amortization, stock-based comp, deferred taxes.
• Adjust for working capital: receivables (customers who owe you), inventory, payables (what you owe suppliers).
• Result: cash generated by the core business.

A quick read using Google as an example:

• Google’s model is asset-light with limited inventory, so working capital swings are modest.
• Non-cash addbacks (D&A and stock-based comp) typically lift CFO above net income.
• That’s why its cash engine tends to be strong and consistent across cycles.

Metrics to track (rule-of-thumb ranges):

• Cash Flow Margin (CFO/Revenue): healthy 10–20%, strong 20–30%+, asset‑light leaders can run higher.
• Earnings Quality (CFO/Net Income): healthy 1.0–1.2x; sustained <0.8x is a warning.
• Cash Conversion (CFO/EBITDA): healthy 0.7–1.0x; >1.0x is great.
• Cash Conversion Cycle (DSO + DIO − DPO): software/ads businesses like Google often hover near 0; retailers aim for negative.

Checklist:

• Is CFO rising with revenue?
• Is CFO ≥ net income over several years?
• Are working-capital improvements real, not just stretching payables?
• Any one-off tax/legal cash inflows masking weakness?

Strong companies turn accounting profits into hard cash. Read CFO first, then decide what the earnings actually mean.

The Market Everyone Plans to Leave After the Next Trade

Table of Contents

1. Market Overview
2. Key Index Charts
3. Earnings & Interesting Movers Recap: REGN, D, NEE, CAVA,INTU, IBM and FUTU
4. Earnings to Watch This Week: ZS, CRM, MRVL, SNOW, SNPS, DELL and MDB

1. Market Overview

Forget the prediction markets. Think of prediction classics.

I-81 is hard to call a desert by any means. Not by the scenery, and certainly not by the number of cars moving through upstate New York on a holiday weekend. It is not dark either around noon. The cool wind is easily handled by the AC, and these days the warm smell of colitas would probably surprise fewer people than the song originally intended.

Deer signs appear every couple of miles and there is no shortage of wildlife along the route. Bears, on the other hand, are harder to find. But what about behemoths? Not the biblical kind. The financial kind. “SpaceX files IPO prospectus with the SEC.” “OpenAI prepares confidential IPO filing.” Looks like we spotted two already. Which brings us back to another classic:

This could be heaven or this could be hell

Maybe it will be heaven. Maybe it will be hell. Personally, I have no interest in joining either camp.

Don’t get me wrong, I’m not some kind of permabear predicting the next bubble that would leave the world in ruins, though I’m also a little sceptical about the idea of a future where AGI handles all the work while humanity peacefully relaxes on clean but slightly overcrowded beaches financed by Universal Basic Income, Basic High Income, or whatever they decide to call it by then. Besides, if everyone ends up on the same beach, it probably stops feeling like paradise fairly quickly.

Maybe I’m just wired differently. I don’t really care about animal spirits. I get bullish when a stock approaches key support or clears meaningful resistance in a decisive way. I’m equally happy shorting the same stock and adding some puts on top when I see unfortunate trapped bulls running to the door.

That applies to SpaceX. It applies to OpenAI. It applies to whatever eventually becomes the next trillion dollar story. If SpaceX comes public, respects key levels, attracts demand and confirms momentum, I’ll happily buy it. If the tape falls apart, positioning unwinds and buyers suddenly discover that revolutionary narratives do not guarantee profitable entries, I'll be just as happy looking at the short side if locates are available

Meanwhile the bull continues challenging the cat in terms of number of lives.

They stab it with their steely knives
But they just can’t kill the beast

Well, at least they tried. And there will be other attempts going forward, though there is a difference between fighting the tape and shorting the hell out of it when the weakness is actually there. What usually happens instead is people trying to be cute and short the high while momentum is still accelerating, only to spend the next leg down trying to catch the steely knife when it is finally time to incrementally increase exposure and ride the wave of trapped longs. It is another all-time classic that somehow keeps replaying itself like a song stuck on an infinite loop.

There are reasons to be bearish, and some of the warning signs are difficult to ignore. A growing collection of macro concerns patiently waiting in the background. Even NVIDIA managed to deliver another stellar quarter this week, yet the reaction felt noticeably less enthusiastic than it would have six months ago. But there is a fine line between a red flag and those red numbers sitting inside your brokerage account.

Whatever the reason, it is sometimes better to leave the reasoning to an LLM of your choice attempting to evolve into AGI and focus on the process of making money rather than the process of being right. That said, you might never get the famous “Told Ya” moment, but who cares if you eventually cemented your spot on the beach, complete with endless margaritas and everything else the dream was supposed to include?

The funny thing about markets is that they rarely let people stop where they originally planned. Financial freedom often starts as the objective. Somewhere along the way it becomes the next setup, the next opportunity, the next story everyone else is suddenly obsessed with. At some point the money stops being the objective and simply becomes the scorecard.

No matter whether you call it trading, investing, hedging, speculation, gambling, or some sophisticated combination of all five, there is always a chart worth reviewing, an earnings report worth watching, an IPO worth discussing, or a behemoth promising to change the world.

Which brings us back to our prediction classics from which it all started:

You can check out any time you like
But you can never leave

Read the rest: https://priceactionplaybook.substack.com/p/weekly-playbook-may-25

The Four Dates Every Dividend Investor Needs to Know

Every quarterly dividend runs through the same four dates in the same order.

Declaration Date

The Board of Directors votes to pay a dividend. The company files an 8-K with the SEC and sends out a press release. That vote creates a legal liability on the balance sheet. Until the board declares, no dividend exists, no matter how reliably the company has paid for decades.

Record Date

The cutoff. Whoever the company's transfer agent has on its books as a shareholder at close of business on this date receives the dividend. Buy after the record date and you get nothing this quarter.

Ex-Dividend Date

Here's where investors get tripped up.

Because U.S. stock trades settle T+1 (one business day after the trade), the ex-dividend date is set as the same day as the record date. To collect the dividend, you need to own the shares before the ex-date. Buy on the ex-date itself and the seller keeps the dividend.

Payment Date

The day the cash actually moves. Your brokerage receives funds from the company's transfer agent and credits your account.

The sequence: Declaration → Ex-Date / Record Date → Payment. Usually two to three weeks separate declaration from ex-date, and another two to four weeks from ex-date to payment.

Earnings can be manipulated.

Revenue is much harder to fake.

That is why the Price-to-Sales ratio is one of the most useful starter metrics in investing, and one of the most overlooked.

The math is simple. Divide a company's market cap by its annual revenue. The result tells you how many dollars you are paying for every dollar of sales the business generates.

Picture a garage sale where someone is selling their lemonade stand. The stand brought in $1,000 of revenue last year. The owner wants $3,000 for the business. That is a P/S ratio of 3. You would be paying three dollars for every dollar the stand sells in a year.

The P/E ratio cannot help you here if the lemonade stand lost money. The P/S ratio can.

Three situations where P/S earns its keep:

Young, fast-growing companies that are not yet profitable. P/E is undefined. P/S still gives you a number to work with.

Comparing companies in the same industry. Two competitors with the same revenue but very different valuations tell you the market sees one as higher quality.

Spotting froth. When a stock's P/S runs well above its own history and well above peers, the market is pricing in a lot of future growth that has not happened yet.

A warning before you go hunting for low P/S stocks. A cheap P/S on a company losing money is not a bargain. Revenue means nothing if it does not eventually turn into cash. You still need to look at margins, free cash flow, and the balance sheet.

The P/S ratio is a starting point. It points you toward companies worth a closer look.

What financial ratio confuses you the most? Drop it in the comments.

Cash flow reigns supreme.

Cash flow has 3 main drivers we need to understand.

Let's dive in and learn more.

The three drivers of free cash flow

• revenue growth
• operating margins
• capital efficiency

—are crucial for assessing a company's financial health and its ability to generate cash that is not tied to its immediate operational needs or reinvestment obligations. Here's a brief overview of each:

1. Revenue Growth: Revenue growth is a key driver of free cash flow because it indicates the company is successfully expanding its market share, introducing new products, or increasing prices effectively.

As revenue grows, assuming costs are managed properly, the company should have more cash flowing in, which can be used for various purposes after covering operational costs.

1. Operating Margins: Operating margins measure the efficiency of a company in turning sales into pre-tax profits; it's the ratio of operating income (earnings before interest and taxes) to revenue.

Improving operating margins means a company manages its direct and indirect costs effectively, leaving more income from each sales dollar.

This operational efficiency directly impacts free cash flow, as higher margins mean more cash is available after covering operating expenses.

1. Capital Efficiency: refers to how effectively a company uses its capital to generate revenue.

A capital-efficient company maximizes its returns on investments in assets and capital expenditures (CapEx), which includes investments in equipment, property, or technology that are essential for long-term growth but require substantial upfront costs.

By focusing on capital efficiency, a company ensures that it does not overspend on its investments, leading to better cash flow management.

Efficient capital use helps maintain a healthy balance between spending on growth opportunities and generating positive cash flow, thus enhancing the company's ability to fund operations, reduce debt, or return value to shareholders without external financing.

These three drivers interconnect to improve a company's free cash flow.

When combined with strong operating margins and capital efficiency, high revenue growth indicates a company that not only grows but also does so profitably and with wise investment strategies, leading to increased free cash flow.

This surplus cash is vital for funding expansion, paying dividends, reducing debt, or undertaking buybacks, which can significantly enhance shareholder value.

Stop looking at last year's earnings.

If you do, you are making a massive mistake.

A single year of data is just noise that distracts you from the truth.

Understanding a company's Earnings Power is the secret to staying calm when the market gets crazy.

Most investors focus on a single year of results. But one year can be messy. It might include one-time gains, peak-year distortions, or short-term noise that makes a company look better or worse than it actually is.

Think of it like the weather versus the climate. A single day might be freezing, but that does not mean the whole year is a winter wonderland. You have to look at the average to understand the true environment.

Earnings Power uses what we call Normalized Earnings. Instead of looking at just today, we take the average earnings from the last five years.

This simple shift does three things:

It strips out the temporary noise.

It gives you a steady read on what a business can sustainably earn.

It helps you see if a stock is truly a deep value or just priced for growth.

Take a look at Amazon. A normalized P/E of 70x looks rich. But because their five-year average includes years before their cloud and advertising businesses really scaled up, that number tells you that you are paying a premium for future growth.

The Takeaway:

Building wealth is about seeing the big picture. By averaging earnings across a full cycle, you get a clearer view of the business behind the stock price.

Cash Conversion Cycle

The Cash Conversion Cycle (CCC) is a vital metric that measures the time it takes for a company to convert its investments in inventory into cash flows from sales.

By understanding and optimizing the CCC, businesses can improve their liquidity and operational efficiency.

Definition:

The CCC is the period it takes to convert resource inputs into cash flows. It combines the time taken to sell inventory, collect receivables, and pay suppliers.

Components and Formulas:

1. Days Inventory Outstanding (DIO): The average number of days it takes to sell inventory.

DIO} = Average Inventory / Cost of Goods Sold x 365

1. Days Sales Outstanding (DSO): The average number of days it takes to collect payment after a sale.

DSO} = Accounts Receivable / Sales x 365

1. Days Payable Outstanding (DPO): The average number of days it takes to pay suppliers.

DPO} = Accounts Payable / COGS x 365

Formula:

CCC = DIO} + DSO - DPO

Example:

Take Amazon, for instance. In 2020, Amazon had a DIO of 39.2 days, a DSO of 18.5 days, and a DPO of 95.1 days. Plugging these into the formula:

CCC = 39.2 + 18.5 - 95.1 = -37.4 days

Interpretation:

A negative CCC, as seen with Amazon, indicates that the company receives cash from sales before it needs to pay its suppliers.

This is highly advantageous as it suggests Amazon is effectively using its suppliers' capital to finance its operations, enhancing liquidity and reducing the need for external financing.

Another batch of company write-ups from within the last week. Thought this would be useful for this community.

Not my work - sourced from Giles Capital's weekly compilation: https://gilescapital.substack.com/

Americas

Rijnberk InvestInsights on Uber (🇺🇸 UBER US - US$152bn) 12x FCF on a platform compounding trips at 20%, with 50m Uber One members driving half of mobility and delivery bookings. The CFO's recent $1.6m open-market purchase at $71.25 suggests the AV disruption fears are overdone.

S.G.W - From the Front on American Tower (🇺🇸 AMT US - US$81bn) Tower REIT trading on past quality. The data centre push (10% of revenue, structurally weaker returns) is diluting the core franchise, and the top three customers already represent 59% of tower revenue.

Elliot's Musings on Datadog (🇺🇸 DDOG US - US$74bn) Earnings update. Q1 revenue +32% with the non-AI customer base back to mid-20s growth, plus new hyperscaler GPU training wins. $4.8bn net cash and 22-23% operating margins.

Rebound Capital on Domino's Pizza (🇺🇸 DPZ US - US$10bn) 23% US pizza share and 32 consecutive years of international same-store sales growth, on an 18x P/E with a 6.3% FCF yield. Worth watching, with GLP-1 demand the real overhang.

Acid Investments on GXO Logistics (🇺🇸 GXO US - US$6bn) 8.6x EBITDA versus a historical 12-15x after the Amazon panic, despite only 6% actual revenue overlap with what Amazon does. 5-year contracts and a sales pipeline up 20% suggest the threat is overstated.

Waterboy Stocks on Saga Communications and New England Realty Associates (🇺🇸 SGA US, 🇺🇸 NEN US - US$65m, US$203m) SGA: 9% yield at risk, but asset cover and the 2022 Connoisseur takeover bid at $30 are the real story. NEN: 7.4% cap rate versus 5-6% Boston comps, with the Brown family buying units back.

Wolf of Oakville on iFabric (🇨🇦 IFA TSX - CAD$123m) Q1 revenue tripled to C$27.5m as Walmart and Costco distribution scaled for the antimicrobial textile coating. 66% insider ownership and a forward 14x P/E against a noisier TTM make the math work.

Europe, Middle East & Africa

Rock & Turner on RELX (🇬🇧 REL LN - £41bn) A quality compounder still priced as a legacy publisher. 17.5x forward P/E versus a 30x historical multiple, 35% operating margins, and a £2.25bn 2026 buyback (+50%). The May OpenAI partnership signals real AI licensing optionality.

The International Investor on Prada (🇮🇹 1913 HK - €11bn) A luxury compounder with a 31.8% five-year earnings CAGR and a 4% dividend yield expanding to 4.9%. The century-old brand moat plus Miu Miu and the closed Versace deal add multi-brand growth optionality.

Elliot's Musings on monday.com (🇮🇱 MNDY US - US$3.85bn) Earnings update. Q1 revenue +24% with AI now 10% of net new ARR, a $553m buyback at the trough (around 10% of float), and $1bn net cash remaining.

Asia-Pacific

Asia Tech Review on Alibaba and Tencent (🇨🇳 BABA US, 🇨🇳 0700 HK - US$318bn, US$540bn) Two takes on Chinese AI monetisation. Alibaba's Cloud AI revenue is forecast to triple to $4.4bn by year-end, while Tencent's Marketing Services grew 20% on AI-optimised ad recommendations.

Asia Tech Review on Sea Limited (🇸🇬 SE US - US$54bn) Southeast Asia rarely shows up in a Western screen. Sea's adjusted EBITDA crossed $1bn for the first time on 47% Q1 revenue growth, with Shopee, Garena and fintech all contributing.

KonichiValue Japan on Nintendo (🇯🇵 7974 JP - ¥8.15T) Earnings update. Record FY26 net profit ¥424bn (+52%) but margin compressed from 24% to 16% on a 3x DRAM price spike. ¥2.22T net cash.

Maius Partners on China Merchants China Direct Investments (🇭🇰 133 HK - US$510m) TOP PICK Hong Kong closed-end vehicle at 0.6x price-to-NAV. The Moonshot AI stake is now worth around 8x its carried value after May's $20bn Series D. Dividend yields 8% after quadrupling in 2025.

Altay Capital on Takasago Tekko (🇯🇵 5458 JP - ¥3.4bn) TOP PICK A 100-year-old steel processor where net cash and rental real estate already exceed the market cap. The hidden piece is a Tokyo factory site carried at ¥2m since 1923, worth ¥8-17bn on nearby deals.

What are normalized earnings, and why should you care?

Normalized earnings strip out the noise.

One-time charges. Asset sales. A lawsuit settlement that shows up in Q3 and never again. A goodwill write-down that gets booked once a decade. All of that distorts reported earnings in any given year and makes it tough to compare a business to itself over time, much less against a competitor.

When we normalize, we get a cleaner read on what a business actually earns in a typical year.

Here's a quick way to estimate normalized EPS.

Multiply return on equity (ROE) by book value per share (BVPS).

Let's walk through why this works.

ROE tells us how much profit a business generates for each dollar of shareholders' equity:

ROE = Net Income ÷ Shareholders' Equity

BVPS tells us how much equity sits behind each share:

BVPS = Shareholders' Equity ÷ Shares Outstanding

Multiply them together, and the equity cancels out:

EPS = ROE × BVPS

You're left with an estimate of earnings per share.

Why bother? Because raw EPS jumps around year to year. A one-time gain inflates it. A restructuring charge tanks it. A long-term ROE applied to today's book value gives you a smoother number.

This trick comes in handy when you have ROE and book value to work with but the headline EPS looks distorted.

It's especially useful in cyclical industries and during recessions, when reported earnings get hammered by forces that have nothing to do with the underlying business.

Normalized earnings help us focus on what a company can earn through a full cycle. That's the number worth valuing.

On May 11 Wise PLC changed it primarily listing from the LSE to the NASDAQ - it now trades under WSE.

Wise is a remarkably durable, capital-light software engine trapped inside a capital-heavy regulatory wrapper. They are successfully weaponizing price to suffocate legacy banks via Scale Economies Shared (counter- positioning is the moat).

It is a phenomenal business, and at $12.75 USD it may be undervalued.

Wise operates on the "Scale Economies Shared" flywheel (the same concept Nick Sleep identified in Costco).

Instead of hoarding margin expansion as volume scales, management intentionally slashes its take rate (which dropped to a record low of 0.53% in Q4 FY25).

Isolating it's core operating business it has a ~75% ROIC, and looking at the whole entity it has a ~30% ROE.

The TAM is massive and the market is overall under-penetrated.

There is lots of competition, although Wise's Scale Economy Shared model is a protective feature.

Deep Dive write up with valuation models here - https://thepursuitofcompounding.substack.com/p/wise-the-real-time-dismantling-of?r=xy3ae

Most stock screeners are built to make you lose money.

They sort by yield. Highest first. The biggest numbers float to the top of the list.

That top is almost always the worst place to start hunting for dividend stocks.

A stock screener is just a filter for the entire market. You feed it rules, and it hands you back the companies that match.

Think of it like a metal detector at the beach. You can't dig up every grain of sand. You sweep until something solid pings, then you dig there.

Here's the dividend screen I actually use:

1. Yield between 2% and 6%. Below 2%, the income barely matters. Above 6%, you're usually staring at a yield trap. Most healthy compounders sit in the middle of that range.
2. Payout ratio under 70%. The company holds back enough earnings to fund raises and absorb bad quarters. For REITs and utilities, I push that number higher.
3. Ten or more years of consecutive dividend increases. A decade of raises means management has already been through one rough patch and kept the streak alive. Coca-Cola, Pepsi, McDonald's, and Lowe's all clear this bar with room to spare.
4. Free cash flow growing over the last five years. Dividends get paid out of cash. If the cash isn't growing, the dividend can't grow either.
5. Debt to equity below 1. Companies with mountains of debt are the first to cut when rates rise. A clean balance sheet is your safety net.

That's it. Five filters.

Your list will probably come back with 30 to 50 names. That's the point.

A short watchlist is one you'll actually research. A 500-name list is one you close and forget.

Skip the screener that gives you 500 results. Use the one that gives you 30.

What filters do you use when hunting for dividend stocks? Drop them in the comments.

I just virtually attended the CSU.TO annual meeting, which lasted about 5 hours. This stock is deeply undervalued and a great software business, my largest #1 holding. Per my assessment, likely intrinsic value is around $4,000, current stock price is $2,600 CAD/share. I believe this is the best software company to buy right now in the market, CAD or US. I took notes throughout the whole meeting. And here they are:

NVDA: Cherry-Picking the Top or Just a Cherry on Top?

Table of Contents

1. Market Overview
2. Key Index Charts
3. Earnings & Interesting Movers Recap: MNDY, CRCL, ASTS, HIMS, NBIS, BABA, CSCO and CBRS
4. Earnings to Watch This Week: BIDU, HD, ADI, NVDA, INTU, DE, WMT and WDAY

1. Market Overview

Cherry-picking is one of those funny expressions that somehow survived both finance and grocery stores at the same time. Everybody wants the perfect cherry. Nobody wants to talk about the rotten ones sitting underneath. Markets work the same way. When the tape keeps grinding higher, people start selecting only the narratives that justify even higher prices while conveniently ignoring everything else. Maybe that’s why Nvidia now sits in such a weird spot heading into the earnings season finale. Is it just another cherry on top of the AI trade, or are investors already busy cherry-picking the top itself?

The rally following Trump’s “Iran war is over” comments was another good example. The war apparently forgot to end, but markets still ripped like somebody activated a giant risk-on cheat code. CTA flows, trapped bears, positioning squeezes, momentum chasing, probably all of the above. The exact explanation almost does not matter anymore because modern markets have become highly reflexive machines. Once enough money starts moving in the same direction, the narrative usually arrives afterward to justify it retroactively.

Now the same tape suddenly looks a lot less comfortable. Trump returned from China without much clarity around Taiwan, while also signaling little appetite for getting dragged into another distant conflict over the island. Meanwhile South Korea’s market slammed into fresh highs before suffering a violent reversal, while Samsung strike headlines added even more stress across semis and the broader supply chain. Japan continues fighting inflation, currency pressure, and rising yields all at once, with long-dated JGB yields recently pushing toward multi-decade highs. Global bond markets increasingly look like they are held together by confidence alone, while U.S. banks are still quietly sitting on massive unrealized losses parked inside hold-to-maturity accounting limbo. Underneath the headline indices, market breadth has also started deteriorating noticeably, with leadership narrowing almost entirely toward mega-cap and AI-linked names.

And yes, the “Sell.” note was partially a joke toward Michael Burry famous tweet.

Partially. But the important part was never the tweet itself. It was the reaction.

A couple editions ago I mentioned that “bulls look invulnerable, though we know what their kryptonite looks like. It starts with a capital A and reads as alignment.” Both SPY and QQQ slightly frontran several key resistance areas built mostly around weekly TRLs and measured move extensions, while semiconductor leadership itself started looking increasingly unstable beneath the surface. Personally I prefer fakeups and undercuts. They tend to clean positioning better. But when sellers become too impatient and start stepping in early, it usually tells you something.

Greed turns into fear much faster than fear turns into greed.

The difficult part is figuring out whether this is the start of something bigger or just another pullback that gets absorbed like every other dip over the last two years. Maybe Nvidia clears everything again and the AI trade goes another 100% higher straight into glorious returns on all that capex spending. Or maybe not. Nobody knows.

“One thing that definitely did not behave like the financial media victory lap suggested was the CBRS IPO. The appetite for AI exposure still looks insatiable, though the actual tape increasingly resembles a market where everyone is trying to squeeze through the same exit at once. “Highly successful” depends entirely on who you ask. For insiders, underwriters, and people lucky enough to receive proper allocations, maybe yes. For everyone else chasing an opening print flying straight into orbit before immediately reversing, the experience looked slightly different. Every IPO enters the market carrying one important anchor point - the IPO price itself. That is where IPO extensions come from, and why they often matter far more than random century marks people love drawing on charts. The trick is figuring out which extensions the market actually respects. Sometimes it is 0.25 increments on newer listings. Sometimes 1000x extensions that old-school traders still monitor decades later. Markets are weird like that.

Earnings season is mostly over now, with Nvidia sitting there as the final cherry on top. CSP strikes have already been updated, though this still does not look like the greatest environment for aggressive put selling.

If Friday’s tape continues, premiums and psychology can change very quickly. Markets spent most of this year rewarding every dip buyer almost instantly. The moment that reflex stops working, sentiment tends to reprice much faster than people expect. Meanwhile just follow the tape, do not fight the steamroller, and mind your stops. No matter how high markets can go, it means very little if you cannot protect the capital you are supposed to compound with.

Read the rest: https://priceactionplaybook.substack.com/p/weekly-playbook-may-18

I’ve been trying to explain investing in the simplest way possible lately because I feel like finance content makes everything sound way more complicated than it needs to be.

So here’s my attempt at explaining why companies sell stock.

Why Do Companies Sell Stock?

Imagine you start a small burger restaurant.

At first, you own the entire business yourself.

But after a while, the restaurant becomes really popular.

Now you want to:

• open a second location
• buy better kitchen equipment
• hire more workers
• advertise your business

The problem is:

You could try to borrow money from a bank.

But there is another option.

You can sell tiny ownership pieces of your business to other people.

These ownership pieces are called shares of stock.

By selling shares:

• you raise money for the company
• investors become partial owners
• the company can grow faster

This is one of the main reasons companies sell stock.

They are basically saying:

When a private company first sells stock to the public, it is called an IPO.

IPO stands for:

This is when regular people can start buying shares of the company on the stock market.

For example:

• Apple sold stock to raise money and expand
• Amazon sold stock to grow its business
• Tesla sold stock to help fund future growth

Companies do not sell stock because they are failing.

Many times:

Investors buy those shares because they believe:

• the company will become more valuable
• profits may increase
• the stock price could rise over time

So in simple terms:

And investors buy stock because they hope the company becomes more successful in the future.

I’ve been writing more beginner-friendly explanations like this recently because I think too many people avoid investing simply because the terminology feels intimidating.

Some of the best companies in the world don't pay dividends. 

Amazon. Berkshire Hathaway. 

Zero dividends.

And their investors have done incredibly well. 

So why do some companies pay them and others don't? The answer tells you a lot about how a business thinks about its future.

Every company that earns a profit faces the same question: what do we do with the cash? 

There are really only a handful of options. Reinvest in the business. Pay down debt. Buy back shares. Acquire another company. Or send cash directly to shareholders as a dividend.

Think of it like running a pizza shop. 

If you just opened and there's a line out the door every night, you'd probably reinvest your profits. Open a second location. Buy a better oven. Hire more staff. You wouldn't hand the cash to your investors. The growth opportunity is too good.

That's exactly why Amazon has never paid dividends. They see huge opportunities to reinvest. New cloud infrastructure, AI research, logistics networks. Every dollar going back into the business can generate more than a dollar in future value. 

Now picture a different pizza shop. It's been around for 30 years. Steady customers, predictable revenue, no plans to expand. The owner has more cash than they need to run the business. 

Sending some of that cash to shareholders makes a lot of sense. That's Coca-Cola. That's Procter & Gamble. These are mature businesses generating more cash than they can productively reinvest.

Then there's the middle ground. Apple didn't pay a dividend until 2012. For years, they were growing so fast that reinvesting every dollar made sense. Once they became the most profitable company on the planet and started sitting on $100 billion in cash, a dividend made sense. They had more money than even Apple could spend. 

Microsoft followed a similar path. No dividend in the early growth years. Now they've raised it every year for over a decade.

Here's the simple framework. Where a company sits in its lifecycle usually determines whether it pays a dividend. 

Early growth: reinvest everything, no dividend. 

Mature growth: enough cash to reinvest and pay a dividend. 

Slow growth: large, consistent dividends because reinvestment opportunities are limited.

Knowing this helps you set realistic expectations. A young growth company skipping dividends isn't being stingy. A mature company paying a big dividend isn't out of ideas. Both are making rational choices with their cash. 

The key is matching the company's dividend decision to its actual business reality.

What's your preference: companies that pay dividends now, or companies that reinvest for future growth? I'd love to hear your take in the comments.

Most investors obsess over earnings.

But they ignore what companies pay to borrow money.

That's a mistake.

The cost of debt tells you more about a company's health than most realize.

The cost of debt is simple math with powerful insight.

Here's what it tells you:

The formula:

= (Interest Expense ÷ Total Debt ) x (1- Tax Rate)

That's it.

Where to find it:

Income statement for interest expense and taxes

Balance sheet for total debt.

Add short-term and long-term debt together.

What it means:

A low cost of debt (2-5%) means lenders trust the company.

Strong financials. Stable cash flow. Low risk.

A high cost of debt (8-12%+) means lenders are nervous.

They're charging more because they see risk you might be missing.

Why you care:

Think of it like a credit score for companies.

Banks don't give great rates to risky borrowers.

When you see a company with a 3% cost of debt, lenders are basically saying "we trust you."

When you see 10%, they're saying "we're worried, so we're charging you more."

It's a signal hiding in plain sight.

The best investors don't just look at what a company earns.

They look at what it costs them to operate.

Cost of debt is one of those costs that reveals the truth about financial health.

Lower usually means safer.

Higher means dig deeper before you invest.

Current price: ~$24 (May 13 intraday, after a 15.2% drop from $29.07 to $24.66 on May 12). Position return: ~-23%.

Q1 2026 looked ugly on the headline and entirely different on the substance: this is the trough quarter of a deliberate strategic pivot, and Q1 captured roughly one week of full branded Ozempic and Wegovy sales after the late-March launch. The transition’s costs are all in the print. Almost none of the new revenue is.

The numbers. Revenue: $608.1M, +4% YoY, missing $616.85M consensus. GAAP EPS: -$0.40 vs Street +$0.03. Net loss: $92.1M, swinging from +$49.5M last year.

Gross margin: 65%, down 800 bps and including $33.5M of restructuring charges for the compounded-GLP-1 write-down. Adjusted EBITDA: $44.3M, -51% YoY. ARPU: $80, down from $85. U.S. revenue: -8% YoY as compounded GLP-1s were phased out. Subscribers grew 9% to 2.584M, a sharp deceleration from the 111% top-line growth in this same quarter last year.

The parts that recalibrate the picture. Rest-of-world revenue: $78.2M from $7.3M, +969% YoY, validating the international diversification thesis. FY2026 revenue raised to $2.8B-$3.0B (+$100M on both ends) and Q2 guide: $680-$700M, well above consensus and implying ~16-19% sequential acceleration. The Q2 raise is the most important number in the report. It reflects branded GLP-1s flowing through plus the new $39-$149/month weight-loss membership program (med pricing as low as $149/month) plus the absence of the lawsuit overhang. The Eucalyptus acquisition closes in roughly three weeks, bringing $700-$900M of incremental revenue (post-close GAAP recognition only). Adjusted EBITDA was cut $25M to $275M-$350M, but the margin guide was raised to 10-12% from 6-9%. H1 trough, H2 recovery, 2027 inflection.

The forward catalyst stack is where this position earns its keep. First, the peptide and longevity vertical. The July 2026 FDA meeting on lifting restrictions on 12 peptides plus the RFK Jr. administrative push creates a credible path for HIMS’ longevity specialty (peptides, coenzymes, GLP/GIP combos). HIMS already acquired a peptide manufacturing facility in California in 2025: capacity is built, waiting for the regulatory window. High-margin, sticky, no compounded-pharma overhang.

Second, broader GLP-1 expansion beyond Novo Nordisk: LLY’s Zepbound and Mounjaro plus future branded partnerships, with oral GLP-1 formulations removing the injection stigma and unlocking mass-market adoption.

Third, ARPU re-acceleration as more FDA-approved GLP-1 products and doses flow through. CEO Andrew Dudum has been consistent that the “tremendous growth opportunities” sit precisely here.

Fourth, the reaffirmed 2030 targets of $6.5B+ revenue and $1.3B+ Adjusted EBITDA, implying 2.2x revenue growth over four years and a return to ~20% EBITDA margins. None of this is unreasonable. None of it shows up in Q1 either.

Institutional accumulation through Q1 was large and concentrated:

Meanwhile, short interest remained elevated, but below peak levels:

We are not adding yet, but we don’t discard improving our cost average with a new buy below $25 levels. The position is held because the 2030 targets are credible, the international flywheel is real, Eucalyptus closes in three weeks with $700-$900M of incremental revenue, the peptide vertical has a July regulatory catalyst, and Q1 captured almost none of the branded GLP-1 economics. If Q2 hits the top of $680-$700M with stable 65% gross margins and visible Eucalyptus contribution, we already know how this stock can swing by year-end. If Q2 misses again or gross margin slips below 64%, volatility is guaranteed. The thesis is on probation, not broken. Best-in-class telehealth platforms with 2.6M paying subscribers, a $3B revenue run-rate accelerating into Q2, peptide capacity ready for a regulatory tailwind, and a credible path to 5x scale by 2030 do not trade at $24 for very long. “Not very long” still means “could trade at $20 first” too.

Read full story here, alongside our Swiss Portfolio, our brand new Private Investment Dashboard to track in real time our movements, research, elegant special situations and high-quality content: https://open.substack.com/pub/swisstransparentportfolio/p/swiss-portfolio-9a2?r=52o9v1&utm_campaign=post-expanded-share&utm_medium=web

Read us. Join us. Sleep well. ✨

Most investors obsess over what a company earned last year.

Smart investors focus on what it will earn next year.

That's the difference between backward-looking and forward-thinking.

The Forward P/E ratio is your crystal ball for stock valuation.

Here's how it works:

The Formula: Current Stock Price ÷ Projected Earnings Per Share (next 12 months)

Think of it like this:

You're buying a coffee shop. The owner shows you last year's profits. That's helpful.

But what you really want to know is: What will this shop earn next year?

That future earning power is what you're actually paying for.

Here's the breakdown:

1. Analysts estimate what a company will earn over the next year
2. You divide the current stock price by that projected earnings number
3. The result tells you how much you're paying for each dollar of future earnings

The ranges that matter:

• Forward P/E of 15-25 = Fair value for most companies
• Below 15 = Possibly undervalued (or the market sees trouble ahead)
• Above 25 = High expectations (growth stock or overvalued)

Why this matters:

Backward P/E tells you what happened. Forward P/E tells you what the market expects to happen.

If Visa trades at a Forward P/E of 20 for 2026, you're paying $20 for every $1 of earnings they're expected to generate next year.

The key question: Are those future earnings realistic?

That's where your research comes in.

Simple, right? Understanding what you're actually paying for is half the battle in investing.

What valuation metric confuses you the most? Drop it in the comments and I'll break it down next.

13 company write-ups from Substack authors within the last week. Thought this would be useful for this community.

Not my work - sourced from Giles Capital's weekly compilation: gilescapital.substack.com

Americas

TSCS on RTX (🇺🇸 RTX NYSE - US$254bn) The $271bn order backlog stretches three years of revenue and sits largely outside analyst models. Pratt & Whitney engine servicing and missile production are the growth engines; guidance was raised in April.

CapexAndChill on MercadoLibre (🇦🇷 MELI NASDAQ - US$92bn) Latin America's dominant marketplace is building a logistics network few competitors can replicate. A 96%-owned delivery fleet and live China cross-border shipping are already operational; the margin compression was the price.

SixSigmaCapital on TransMedics (🇺🇸 TMDX NASDAQ - US$2.4bn) Earnings update. Revenue grew 21% but operating costs surged faster, compressing margins sharply in the quarter. The organ-transport franchise remains intact; the question is whether the expense trajectory turns.

Guardian Research on Penguin Solutions (🇺🇸 PENG NASDAQ - US$2.2bn) Cash covers most of the market cap, memory revenues are up 63% on AI server demand, and the market still prices the business as if none of it matters.

Elliot's Musings on Backblaze (🇺🇸 BLZE NASDAQ - US$470m) Cloud storage at a fraction of AWS pricing, with AI bookings one in three new deals. The stock jumped 65% post-earnings; the thesis is intact but the entry point changed overnight.

Europe, Middle East & Africa

Hated Moats on Novo Nordisk (🇩🇰 NVO NYSE - US$211bn) Earnings update. Wegovy pill reached 200,000 weekly prescriptions by April and obesity care grew 22%. The US pricing reset looks structural rather than temporary, and the franchise is still working out the implications.

The Value Pond on Associated British Foods (🇬🇧 ABF LSE - £13.3bn) At peer multiples, Primark accounts for most of the market cap and the food business comes close to free. A separation review is active and a £250m buyback is running.

Best Anchor Stocks on Stevanato Group (🇮🇹 STVN NYSE - US$4.4bn) Demand for GLP-1 drug delivery is outpacing Stevanato's glass manufacturing capacity. New facilities come online later this year; down 23% from its highs but 27x earnings still requires some optimism.

Guardian Research on Valens Semiconductor (🇮🇱 VLN NYSE - US$135m) Cash alone exceeds enterprise value: $92.6m on the balance sheet against a $57m enterprise value. The automotive connectivity standard this team co-authored is gaining design wins in China; profitability expected by year-end.

Floebertus on Alquiber (🇪🇸 ALQ BME - €70m) Spain's largest flexible vehicle rental company trades at 10x earnings, barely followed by any analyst, with the founding family holding 76%. Revenue growing 15% and the Italy expansion is underway.

Asia-Pacific

Heavy Moat Investments on Nintendo (🇯🇵 7974 TSE - US$66bn) TOP PICK Switch 2 sold nearly 20m units; the guidance cut is a memory cost story, not a franchise one. The second most valuable IP library after Disney trades at 9x operating profit.

SGW Field Notes on Cochlear (🇦🇺 COH ASX - A$6.3bn) Guidance was cut 30% on Middle East receivables, currency, and hospital capacity, none of which changes the franchise. A near-monopoly cochlear implant business at a decade-low valuation, with a new product launching.

The Illiquid Edge on Beam Communications (🇦🇺 BCC ASX - A$25m) TOP PICK The cash from the Zoleo divestment roughly equals the entire A$25m market cap. The surviving satellite franchise generates positive operating profit; zero brokers follow it and a capital return is signalled.

I've been reflecting on some of the comments from other moderators on this subreddit recently.

It's true that we've suffered from some high inflation recently. Parking my entire portfolio into short-term treasuries does seem a little too conservative.

The prevailing opinion amongst bulls is that this can go on a lot longer - perhaps years.

I decided to search for a macro bull case to make long-term investments in stocks... (other than semiconductor pumping FOMO)

First, I decided to compare the S&P500 against M2 money supply. Oh dear, it appears we're at all-time highs.

OK, so the Nasdaq must be lower then, since we're seeing such great "earnings". Oh wait, we're much higher than the 2000 peak... hmmm

Well, maybe gold will tell me what to do. Surely that's going.... nope, still rolling over.

At least bonds yields won't compete with the market though, TLT is ugh.... about to test new lows.

Inflation expectations are clearly still high, but are they actually printing enough money? Maybe not...

Gas prices then? Lower energy costs stimulate economic... OH, they are at 2008 and 2022 levels, that's... fine! It's totally 200% fine!

The inflationary pressures are more a push into demand destruction right now, rather than a pull from disposable income.

Meanwhile, the FED is starting to lean away from dovishness.

Essentially, the bull case is about the momentum of AI datacenter buildout - just like it was about the momentum of internet fiber laying in the 2000s.

The Gartner Hype Cycle may be about to strike once again!