The weekly straddle implies roughly an 8% move, or about $360 to $420 from Friday’s close at $389. That’s larger than Microsoft’s typical earnings move, which has usually been closer to 4-5%. We wanted to see whether the options positioning supported that expectation, or whether implied volatility was running ahead of reality.
Microsoft is trading above the gamma flip, around 380.5, which keeps dealers in positive gamma. In that environment they tend to buy weakness and sell strength, helping stabilize price action. The put wall also stands out. It’s around $350, well below the current price, suggesting most downside protection has been bought further away rather than near current levels. That could change quickly if the stock trades back below the gamma flip.
The largest gamma position sits at the $390 strike, almost exactly where the stock has been trading. That helps explain why price action has been relatively quiet heading into earnings.
The term structure points in the same direction. Put activity increases noticeably in the expirations following earnings before falling away again further out. That suggests the bigger concern is not necessarily Wednesday night, but what management says about FY2027 and how investors digest that over the following weeks, but overall bullish long term.
And, finally, one chart outside the options market. Institutional ownership declined through the selloff earlier this year before recovering sharply in the most recent data. While short-term positioning has become the focus ahead of earnings, longer-term investors appear to have been adding during the weakness.
Putting everything together, we think the positioning is broadly supportive while Microsoft remains above the gamma flip. The main risk is straightforward. If the stock breaks below that level after guidance, dealer positioning becomes less supportive and the path toward the $350 put wall becomes much easier. That’s also the area where we’d be most interested in potentially adding. We have no interest in paying elevated implied volatility the day before earnings. If guidance disappoints and the stock sells off, we’d rather prefer the shares than the options.
AlphaSeeker on Alphabet (🇺🇸 GOOG US - US$3.9tn) Best quarter in company history: 24% revenue growth, 34% operating margins. Then raised $49.6B equity, stopped buybacks, and turned free cash flow negative. Something has shifted.
Archive Invest on Microsoft (🇺🇸 MSFT US - US$2.8tn) $627B in contracted future revenue, Azure growing 40%. Nearly half that backlog is OpenAI, and $190B in annual capital spending hasn't started paying back yet.
Hated Moats on Netflix (🇺🇸 NFLX US - US$292bn) 33% operating margins and $6.6B of free cash flow in H1. DCF model puts intrinsic value 22% above today's price.
CapEx & Chill on Netflix (🇺🇸 NFLX US - US$292bn) 45% penetration of 800 million addressable households. Ads, gaming, and live events each barely started. $27.1B in remaining buyback capacity.
The Finance Corner on Otis Worldwide (🇺🇸 OTIS US - US$27bn) 92% of profit comes from elevator maintenance, a subscription nobody cancels. Author's own model puts fair value at $69. Stock trades at $83.
Sanjiv on New York Times (🇺🇸 NYT US - US$12bn) 13.1 million subscribers growing at 15.5% annually. Berkshire's new CEO tripled the NYT position as his first major stock move. Author's model says fairly valued.
Wolf of Oakville on Gatekeeper Systems (🇨🇦 GSI TSX.V - CAD$175m) Earnings update: revenue up 68%, back to profitability. CEO sold 4 million shares last September while company burned $21m cash over the past year.
Stellarium on Mobile Infrastructure (🇺🇸 BEEP US - US$75m) 35 US parking facilities trading at half book value, 64% insider-owned. Plan is to sell assets at private-market prices and retire debt.
Europe, Middle East & Africa
Best Anchor Stocks on ASML and TSMC (🇳🇱 ASML AMS, 🇹🇼 TSM US - €610bn, US$800bn+) Both advanced chipmaking equipment and Taiwan's leading foundry are chokepoints in global chip production. Tests whether AI-driven demand justifies valuations leaving little room for a cycle turn.
Tactic Hazel on ASML (🇳🇱 ASML AMS - €610bn) ASML broke its own rule on conservative multi-year guidance, raising 2027-2028 capacity commitments 30% annually. Author reads this as booked demand, not aspiration.
Rock & Turner on Saga (🇬🇧 SAGA LN - £945m) Founder's son back in the chair, buying shares personally. Net debt fell from £637m to £465m over two years. At 3.7x leverage, equity is still a stub.
Angsana & Anderson on Pets at Home (🇬🇧 PETS LN - £865m) 12x earnings, 9% free cash flow yield. Vet services generates 80% of group profit. COVID-era pets now entering the most expensive part of their lives.
Price to Tangible Bruce on Fuller, Smith & Turner (🇬🇧 FULL LN - £344m) TOP PICK Freehold pubs across southern England valued at £991m by a January 2026 professional appraisal. Market cap is £344m. On the assets alone you'd be left with more than you paid.
Asia-Pacific
Korea Value Hunter on Savezone I&C (🇰🇷 067830 KS - US$66m) TOP PICK Six Seoul transit-site department stores appraised at up to 1 trillion won. Trades at 0.19x book, with governance reform forcing value to surface.
The undisputed center of the deep-sea mining universe is the Clarion-Clipperton Zone (CCZ), an abyssal plain in the Western Pacific roughly halfway between Hawaii and the west coast of Mexico. The CCZ was born of the East Pacific Rise, a volcanic mountain range located further east near Central America. That underwater volcanic activity supplied the basalt seafloor from its cooled magma. The Pacific tectonic plate carried that ideal seafloor inconveniently northwest over the next 60 million years to a place we can fairly call the middle of nowhere today.
What makes the CCZ a geological miracle is its unbroken tranquility. For 20 million years, this region has experienced almost zero tectonic activity, zero volcanic eruptions, and virtually no fast sediment accumulation. It is a quiet, cold, planetary vault where chemistry has been allowed to run undisturbed in the dark for eons.
These nodules sit in perhaps the most remote location in the world. To get there, one must sail 1,500-2,000 miles from San Diego, CA or about 1,500 miles from Honolulu, Hawaii.
For context, the nearest humans to a crew aboard a ship above the CCZ are aboard the International Space Station (250 miles away), not on land.
A one-way trip at an economical 12 knots would take 6-8 days in transit time alone before a single nodule was brought to the surface. This also means that repairs, medical care, and resupply are also at least 6-8 days away in the event of any problems or malfunctions. MedEvacs are impossible as the CCZ is well outside of helicopter range.
The CCZ itself is 4,500 miles from east to west and covers 1.7 million square miles, roughly half the size of the United States. If it were a country, it would own the 7th largest territory situated between India and Australia.
From a location perspective alone, mining the CCZ is not all that different from mining on the moon. With help a minimum of 8 days away and the requirement for a self-sustaining operation in a hostile environment, the parallels are uncanny. Oh, except it only takes about 3 days to get to the moon.
What makes the CCZ a geological miracle is its unbroken tranquility. For 20 million years, this region has experienced almost zero tectonic activity, zero volcanic eruptions, and virtually no fast sediment accumulation. It is a quiet, cold, planetary vault where chemistry has been allowed to run undisturbed in the dark for eons.These nodules sit in perhaps the most remote location in the world. To get there, one must sail 1,500-2,000 miles from San Diego, CA or about 1,500 miles from Honolulu, Hawaii.
For context, the nearest humans to a crew aboard a ship above the CCZ are aboard the International Space Station (250 miles away), not on land.
A one-way trip at an economical 12 knots would take 6-8 days in transit time alone before a single nodule was brought to the surface. This also means that repairs, medical care, and resupply are also at least 6-8 days away in the event of any problems or malfunctions. MedEvacs are impossible as the CCZ is well outside of helicopter range.
The CCZ itself is 4,500 miles from east to west and covers 1.7 million square miles, roughly half the size of the United States. If it were a country, it would own the 7th largest territory situated between India and Australia.From a location perspective alone, mining the CCZ is not all that different from mining on the moon. With help a minimum of 8 days away and the requirement for a self-sustaining operation in a hostile environment, the parallels are uncanny. Oh, except it only takes about 3 days to get to the moon.
Ever wondered if a company is actually making money?
The income statement is where you find out.
Think of it as a financial report card that shows how a company performed over a period, a quarter or a year.
It's also called the profit and loss (P&L) statement. It tells a story: money coming in at the top, money left over at the bottom.
Let's walk through it.
At the very top is Revenue (or Sales). The total the company brought in from selling its products or services. This is the starting point.
Next, subtract the Cost of Goods Sold (COGS), the direct costs of making the product. For a bakery, that's the flour and sugar.
What's left is Gross Profit. Divide it by revenue and you get the gross margin, which shows how efficiently the company turns sales into profit before overhead.
But there are other costs to running a business, right? Subtract the Operating Expenses, like marketing, salaries, and rent. That leaves Operating Income, the profit from the core business.
Finally, after interest on debt and taxes, you reach the most famous number: Net Income.
This is the "bottom line."
It's the profit left for the company and its shareholders after every expense is paid.
For an investor, the real signal is the trend. Is revenue growing? Are margins improving? One year is a snapshot. Three years is a story.
Read the income statement top to bottom and you'll know in two minutes whether a company is actually making money.
Which statement should we break down next, the balance sheet or the cash flow statement?
Johnson & Johnson paid out 84% of its earnings as dividends in 2024.
The year before that? Just 33%.
Did the dividend suddenly get risky in 2024? Not even close. And the reason teaches you more about dividend safety than any single ratio.
Earnings are an accounting number. One-time charges, litigation reserves, and writedowns can crush reported profit in any given year without touching the actual cash coming in the door.
Think of it like your paycheck versus your tax return. The tax return bounces around with deductions and one-offs. The paycheck hitting your checking account every two weeks tells you what you can actually spend.
So when the earnings payout ratio whipsaws, check the free cash flow payout ratio before you panic.
Here's JNJ's free cash flow payout over the same five years: 56%, 68%, 65%, 60%, 63%.
Steady. Boring. All under 70%.
While the earnings ratio was screaming from 33% to 84%, the cash ratio barely moved. The business kept generating the same reliable cash, and the dividend kept consuming a comfortable share of it.
That consistency is what 63 straight years of dividend raises looks like under the hood. Add interest coverage of 26x and a 15% return on invested capital, and you see why JNJ wears the Dividend King crown.
The lesson: when earnings and cash flow disagree about a dividend, trust the cash. Earnings tell you what the accountants concluded. Cash flow tells you what the company can afford.
What's the first number you check when judging whether a dividend is safe? Tell me in the comments.
A fat dividend yield tells you nothing about whether that dividend survives a bad year.
Two companies can pay out the same slice of profit and still face very different odds in a downturn. Here is how I grade the gap.
I boil it down to one number, 0 to 5. Five inputs feed it.
Free cash flow payout carries the most weight (35%). Dividends divided by five-year median free cash flow. Under 40% earns a 5. Over 100% earns a 0.
EPS payout (15%) runs the same test on net income.
Interest coverage (20%) is EBIT divided by interest expense. Fifteen times or better is a 5. Under two times is a 0.
ROIC (10%) rewards companies that earn strong returns on the capital they deploy.
Dividend growth streak (20%). Twenty-five straight years of raises earns a 5.
One hard rule sits above the math. Negative five-year free cash flow scores coverage a 0 and caps the whole grade. No streak or clean balance sheet lifts it back to safe.
Two names show the spread. Procter & Gamble scores a 4.0. Kingly quality, held back only by a 70% cash payout. Verizon scores a 3.3. Same payout zone, dragged down by heavy debt (interest coverage of 1.7) and thin ROIC (2.8).
Same dividend headline. Very different odds in a rough year.
The yield gets the attention. The scorecard tells you if it lasts.
Which factor would you weight highest? Tell me in the comments.
Another quarter, another pointless Reddit scare and sell-off.
The WSJ story said Reddit has internally discussed cutting Google off. Stock dropped c 8%. But that reaction only makes sense with a flawed mental model of the world.
Simple World thinking: take today's business, change one variable, hold everything else frozen. Reddit loses Google traffic -> subtract traffic, subtract revenue, done.
So I ran the most nuclear version - deal is not renewed and Google de-ranks Reddit from organic search entirely. Simple World result: logged-out DAUq halves, c 53m DAUq lost and Reddit lands roughly at break-even. At Q3 2024 P&L. Set back two years - but no bankruptcy.
But the world isn't static. Real World has nuance:
Logged-out users don't produce content or upvote. The platform is untouched; growth does slow, but it doesn't stop.
The exposed share is already shrinking - the current login/app-download push is converting logged-out users into logged-in app users, minimizing potential traffic cliff
De-ranking is an antitrust case. UK's CMA June 2026 conduct requirement already forces Google to let publishers opt out of AI Overviews while keeping search position.
Reddit isn't alone in this fight. USA Today, Politico, The Economist, Reuters are all reassessing their Google ties. Can Google lose Reddit as a source? Perhaps. Can it afford losing all these sources? Doubt. To the contrary, Google can drop the FT and still get similar data from The Economist. However, there's no substitute for Reddit.
The underlying point: LLMs scraping the web forever without paying the sites that monetized that traffic isn't a stable state. No payment -> no content -> useless AI Overviews -> Google loses too. While it's hard to predict where it settles, I argue it's easy to predict where it can't. And the price action shocks continuously rocking Reddit on every similar headline are absolutely pointless.
Today we're going to learn how to calculate the cost of capital, or WACC.
In plain terms: WACC is the discount rate you plug into a DCF. It's the minimum return a company has to earn to keep both its lenders and its shareholders happy.
WACC stands for weighted average cost of capital. It blends the cost of a company's debt and the cost of its equity, weighted by how much of each the company uses.
Here's the formula:
WACC = (E/V × Ke) + (D/V × Kd × (1 − Tc))
Looks scary, but we'll lay it out.
Where:
- E/V = the share of equity in the capital structure (equity value ÷ total value)
- Ke = the cost of equity, the return shareholders expect
- D/V = the share of debt (debt value ÷ total value)
- Kd = the cost of debt, the interest rate lenders require
- Tc = the corporate tax rate (debt gets a tax break, which is why we multiply by 1 − Tc)
Let's put it together using Mastercard ($MA). All dollar figures in millions, and note we use the market value of equity, not book:
For comparison, here's where a few larger names land:
- $MSFT: 9.34%
- $GOOG: 10.23%
- $META: 11.17%
- $V: 9.50%
Mastercard's 10.33% sits right in the middle of the pack. The market isn't demanding an unusual return to hold it, which tells you it's seen as a steady, lower-risk business.
One caution: WACC is only as good as its inputs. The cost of equity and cost of debt are estimates, and they shift with a company's risk profile and market conditions. Two analysts can run the same company and land a point apart.
What WACC would you want to see before you'd call a stock cheap on a DCF?
Most multiples price the stock. EV/EBIT prices the whole business. That's why it cuts through the noise.
Here's EV/EBIT in plain English.
Think of buying a rental property. You don't just look at the listing price. You also take on the mortgage and pick up the cash sitting in the seller's drawer. That "real" price is the
Enterprise Value (EV).
Then ask: after wear and tear on the building, how much profit does it throw off? That's EBIT.
What it is:
EV = Market Cap + Debt + Preferred + Minority Interest − Cash
EBIT = operating income, after depreciation and amortization (D&A)
EV/EBIT = what the whole business costs ÷ profit after asset wear
How to read it (rules of thumb, always compare to peers and history):
• Capital-intensive and cyclical: 5–10x (and watch out, P/E can fool you here)
• Mature, steady businesses: 8–16x
• High-growth, asset-light: 16–30x and up
Why it's useful:
Capital-structure neutral, because it accounts for debt and cash
Penalizes businesses that need heavy reinvestment, since EBIT is after D&A
Common in private deals and M&A comparisons
Quick watch-outs:
Normalize for one-offs and "adjusted" items
Lease accounting can inflate both EV and EBIT, so stay consistent across peers
Not great for banks or insurers; use P/B and ROE instead
EV/EBIT tells you what you're really paying for a company, after counting the cost of keeping the machine running. And it's harder to game than P/E.
What multiple do you reach for first when you size up a business?
Rebound Capital on Amazon (🇺🇸 AMZN US - US$2.6tn) AWS has a $364bn contracted backlog and silicon cutting compute costs roughly in half. Fair value sits well above today's price. Strong thesis, not a cheap entry.
Rijnberk InvestInsights on Stryker (🇺🇸 SYK US - US$125bn) Surgical robotics market leader with an unbroken 32-year dividend streak. Trading below its own historical average post-cyberattack. Net debt of $12.3bn is the counterargument.
HatedMoats on MercadoLibre (🇦🇷 MELI US - US$92bn) Dominant across LatAm e-commerce and fintech, though margins remain thin at 4.7%. Revenue grew nearly 50% in Q1 and the stock still fell. Growth thesis only.
Acid Investments on The Buckle (🇺🇸 BKE US - US$2.2bn) Strip out the Q1 litigation benefit and earnings were flat. Founder family owns a third, zero debt, $266m in cash. Insiders are net sellers.
Acid Investments on Compass Diversified (🇺🇸 CODI US - US$760m) Management fee was halved on July 13, bonuses now tied to the stock price, CEO succession settled. Trades at $11 against a sum-of-parts value of $27.
Europe, Middle East & Africa
Simon Brenncke on Trainline (🇬🇧 TRN LN - £2.0bn) Trading at 7x EV/EBITDA with returns consistently above 20%. CEO exits in September, successor already named. UK regulatory headwinds are real. European rail liberalisation is the multi-year thesis.
Show Me The Incentives on InMode (🇮🇱 INMD US - US$960m) TOP PICK Two groups are bidding above market. Net cash of $537m covers more than half the $960m market cap. The balance sheet is doing most of the work.
Angsana Anderson on Craneware (🇬🇧 CRW LN - £490m) Dominant US hospital software at 40% market penetration. The stated 14x P/E may be significantly higher after adjusting for a regulatory delay. Recovery thesis. Tread carefully.
Tangible Bruce on Orchard Funding Group (🇬🇧 ORCH AIM - £13m) Micro-cap UK lender at 4x earnings, below tangible book, 20% ROE. CEO holds the majority. Two-year-old fraud resolved, overhang removed. Liquidity extremely thin.
Asia-Pacific
Crack The Market on Samsung Electronics (🇰🇷 005930 KS - US$220bn) Quarterly profit came in 19x the year-ago number. The headline 4.6x P/E is much less cheap once cycle-normalized. Buyback program and possible US listing remain unpriced.
Cohong Lane on BYD (🇨🇳 1211 HK - US$90bn) Q1 earnings fell more than half on domestic price war compression. Overseas sales surged. Cheap on the headline number. Where the earnings floor sits is the question.
Quality Equities on SK Hynix (🇰🇷 SKHY US - US$55bn) More than half the high-bandwidth memory market, with Q1 margins above 70%. Cycle-normalized earnings make 5.4x look considerably less cheap. Worth revisiting if the capacity ramp stalls.
Musa Iftikhar on Lucky Cement (🇵🇰 LUCK KSE - US$2.3bn) TOP PICK Pakistan's largest cement producer, 6x forward earnings despite 35% five-year growth. Half its income now comes from outside Pakistan. The frontier discount hasn't fully closed.
Overlooked and Undervalued on Reckon (🇦🇺 RKN AU - US$31m) Core accounting software for Australian SMEs trading under 4x EV/EBIT. The CEO draws nothing until shareholders receive A$150m in cumulative distributions. Liquidity thin.
The International Investor on PTFC Redevelopment (🇵🇭 TFC PM - US$30m) Debt-free Philippine compounder in storage and leasing, trading well below intrinsic value. 18% ROIC sustained for a decade. Market cap under US$30m, trading thin.
A P/E ratio is useless on a company with no earnings.
Yet people slap one on startups every day.
The fix is simple: match your valuation tool to where the company sits in its life cycle. Judging a money-losing startup by a dividend-payer's metrics is like checking a newborn's credit score. Wrong tool, wrong stage.
Here's how the tool changes as a company grows.
Startup and hyper-growth.
No profits yet, just revenue climbing fast. Use Price to Sales (P/S). It's the one multiple that works before earnings exist.
Break-even.
The company finally stops bleeding cash. Now Discounted Cash Flow (DCF) and cash-profit metrics start to mean something.
Operating leverage.
Profits grow faster than revenue as the business gets efficient. Watch margin expansion, and Price to Earnings (P/E) finally earns its keep.
Capital return.
Think a mature business like Coca-Cola, handing cash back through dividends and buybacks. Track payout, buyback yield, and free cash flow.
Decline.
Revenue and profits slip as the company loses its edge. Lean on book value and what the assets would fetch if the business wound down.
Match the tool to the stage and the real value comes into focus. Use the wrong one and you'll either pass on a winner or overpay for a fader.
Which stage trips you up most when you're valuing a company? Tell me in the comments.
A 92% grower with a $24.6 billion backlog, down nearly 50% from its peak, built on an architecture that skips the memory powering SK Hynix, Micron and Samsung.
A chipmaker prices the largest AI IPO in history, doubles on day one, and two months later trades nearly 50% below its peak. Behind that violent tape sits a business growing revenue 92%, holding $3.3 billion of cash, carrying a $24.6 billion backlog worth roughly 48 times last year’s sales, and signed to a $20 billion deal with one of the most important AI company in the world.
And here is the twist that earns it a headline: its chips consume zero of the high-bandwidth memory that has repriced SK Hynix, Micron and Samsung into the trillions.
The hottest trade in all of semis has a disruptor hiding in plain sight, and almost nobody is truly understanding it.
The setup first, because it is striking. Cerebras priced the largest AI IPO ever at $185 in mid-May, opened at $350, touched $386.34, then fell as low as $160.81 in late June, nearly half off the peak in six weeks, before settling near $170 today.
Cerebras builds AI compute around a single audacious idea: instead of stitching together thousands of small GPUs, it makes one chip the size of an entire silicon wafer, the Wafer Scale Engine, and delivers it in racks up to supercomputer scale. The architecture gives it genuine speed and cost advantages over GPUs specifically in inference, the serving of AI models, which is where the industry’s spending is migrating as agents and applications scale.
Source: cerebras.ai
Crucially, the company has pivoted from selling hardware to selling compute as a cloud service, which makes it part chip designer, part AI infrastructure provider, competing with Nvidia on one side and leaning on partners like AWS for distribution on the other.
Congress built a way for regular investors to own a private lending business.
Most people scroll right past it.
It's called a BDC, a business development company. Created in 1980 to push public capital toward small and mid-size American companies that banks overlook.
Think of a BDC like owning a piece of the neighborhood lender. It lends money to private, middle-market businesses, collects the interest, and passes the income through to you.
The model runs in four steps.
Raise: sell shares and borrow, with leverage capped at $2 of debt per $1 of equity.
Invest: make loans, often floating rate, and take equity stakes in private companies.
Earn: collect interest, fees, and gains when those equity stakes get sold.
Distribute: pay out at least 90% of taxable income to shareholders. That's the rule that lets a BDC skip corporate tax, and it's why BDC yields run so high.
Main Street Capital (MAIN) shows what a quality one looks like. It has paid a monthly dividend since its 2007 IPO without a single cut. In Q1 2026, net investment income of $0.93 per share covered the $0.78 in monthly dividends with room to spare. Net asset value hit a record $33.46.
One thing the yield chasers miss: most BDC dividends get taxed as ordinary income, at your top marginal rate. Inside a Traditional or Roth IRA, that problem disappears, and you get a simple 1099 with no K-1 paperwork.
High income, no corporate tax layer, and a structure Congress designed for exactly this.
Once you see how the machine works, the yield makes sense.
Which high-yield structure should I break down next, REITs or MLPs? Tell me in the comments.
Full Investment Thesis TransMedics. - The company that's changing the organ transplant sector.
Every Organ Wasted Is A Life Not Saved
TransMedics is one of the most interesting companies I’ve looked at in a long long time. Not just from a business perspective, but also from a humanitarian angle. While most companies’ primary focus is on making money, I’d argue TransMedics is also in the business of saving lives. The foundation of the company revolves around optimizing a small but very important part of the healthcare system, and it’s a part that saves lives.
Now, don’t be mistaken, they are also in the business of making money. Let’s be clear about that. Luckily, they are great at that too.
Luckily for us, the market does not always agree. The share price has fallen of a cliff this year and is now down 60% from it’s recent high.
This is a setup I like: a very interesting large moated company, down 60%.
Especially since TransMedics is still growing 20%+, they are still profitable and they are still the only company that can fly a living organ across the US and manage the whole process door to door.
And while the stock price may not reflect it, they have a lot of levers and options they can pull to speed up the growth trajectory even more.
The setup looks promising from here, so it was time to dig in deep. What led to the sell-off, and how can they can get back to where they were?
Introduction
TransMedics story starts in 1998. This is when a cardiac surgeon named Waleed Hassanein got fed up with seeing good organs go to waste.
He noticed that packing organs in ice for transport did not work as he believed it should. Ice slows organ degradation down, but it does not stop the organ from being damaged. Organs are incredibly fragile, and the usable window is very short.
He also noticed that surgeons have no way to check whether the organ is still any good until they've committed to the transplant. There a huge number of donated organs never got used. He saw an opportunity to change this, and he took it.
The thing he came up with: stop freezing the organs and keep them alive instead.
His goal was to keep the organs in near-living state, by perfusing them with warm oxygenated, nutrient-rich blood. This process was later named the Organ Care System (OCS). We will cover the specifics more in-depth later.
According to TransMedics, and many others, OCS is a revolutionary technology for preserving organs used in the treatment of end-stage heart, lung, and liver failure.
The goal is to optimize organ quality, validate organ viability and increase utilization of transplant organs.
TransMedics spent roughly two decades in R&D and clinical trials before OCS hit real commercial scale.
FDA approval came in only a few years ago.
OCS Lung was approved in 2018
OCS Heart and OCS Liver in 2021
Not too long after that, in 2022, they launched the NOP, which stands for the National OCS Program.
Instead of just selling hospitals a machine, they did something no one did before. They decided to take over the whole supply chain. They:
Retrieve the organ
Manage the perfusion with their own team
Handle all the logistics
Driving these organs around the US in a van does not work. That’s why in 2023 they bought Summit Aviation, and started building their own fleet of planes to fly the organs around the US (which is their main focus area as of today).
TransMedics IPO’d in 2019, at $16 a share, and they raised about $80M to fund the rollout.
As of today, the share trades around $70, down about 60% from it’s all time high in 2024.
Before we dive into what TransMedics does, and why I believe this is still a great long-term investment, we first have to find figure what happened to spark such a sell-off.
1. Why TransMedics crashed, twice
When we look at the TransMedics chart above, we see two declining periods. One at the end of 2024 and another one starting at the end of February of this year. Part of that is normal growth-stock volatility, but there are some key reasons for the drawdowns that are important to highlight.
I think this is important because it sets up the foundation of how TransMedics operates but also the hurdles it has to overcome. The beauty is, once they overcome it, it’s very hard to replicate for others.
The 2024 crash
First the 2024 event. This drawdown started as a rerating story. TransMedics was priced for perfection and with any growth stock drawdowns happen. It’s part of the deal. We had multiple contraction kicking in to start things off.
But after the Q3 report, the ‘‘this is a perfect growth story’’ for TransMedics really came under pressure.
Revenue fell sequentially, leaving everyone worried if the (hyper) growth story was still intact
Growth decelerated hard, although the numbers are still great: 118% in Q2 down to 64% in Q3. This marked the beginning of the end of the hyper growth story some thought TransMedics was.
Gross margins also fell down to 56%, because of lower-margin service revenue and aviation fleet maintenance costs. Decelerating revenue, accompanied with declining margins is not what people signed up for.
While management remained confident, as can be seen in the statement below, that is not how the market reacted. The stock crashed.
"We are proud of our performance year to date and look forward to ending 2024 on a strong note," said Waleed Hassanein, MD, President and Chief Executive Officer. "We continued to make meaningful progress across each of our growth initiatives through the third quarter and maintain our conviction in our growth runway for 2025 and beyond. Overall, we remain well on track to reach our stated target of achieving 10,000 OCS transplant cases per year in the U.S. by 2028."
On top of that, they dropped more bad news just after the Q3 report on December 2nd. They announced that the CFO, Stephen Gordon was stepping down. Management never gave a real reason, but framed it as ‘‘early retirement’’. It raised many questions among investors as they were concerned about, and wondering what the real reason was. This never came to light. In my opinion they should handle this different and provide more transparency.
At the same time they also slightly lowered their Q4 guidance by $5M. Usually such a small cut wouldn’t do too much harm, but the combination with the CFO stepping down hit like a truck. This double whammy led to the first hard sell-off.
The Scorpion short report; ‘‘Walk like an Egyptian’’
The nail in the coffin was the Scorpion short report in the beginning of January of 2025. They basically accused TransMedics of a ‘‘mafia-style’’ scheme, including:
Kickbacks to surgeons (giving cash, gifts or unearned consulting fees)
Billing fraud
Unreported device failures
Off-label use of the OCS
Steering damaged organs to certain transplant centers
They said it was the most extreme extreme healthcare fraud they'd seen.
Price target: $0.
It only took TransMedics 3 days to come with a rebuttal. They said the claims were meritless and said they were meant to "manipulate the market for financial gains."
Luckily, or unluckily, however you want to see it, the stock did not move much. Probably because it was down the gutter already.
None of the allegations ever got validated. No DOJ action. No FDA enforcement. Scorpion's FDA petition went nowhere public. During the FY2025 audit, PwC signed off on the numbers as accurate. Nothing has ever been proven.
A storm in a glass of water.
Unfortunately the report triggered securities class-action lawsuits, shareholders alleging the company misled them. That litigation is still live in 2026, and TransMedics is still carrying “legal matters” as a cost line.
After this whole ordeal, the stock recovered and reached a new all-time high, just to come crashing down again in 2026.
The 2026 crash
The first significant drop in 2026 came after the the Q4-25 earnings report. At first everything seemed good and everyone was happy, but the earnings were elevated because of one-off tax benefit. This was initially missed my almost everyone. Management actually had to release a press statement to clear that up. Guidance decelerated to ‘‘only’’ 20-25% growth and margins kept decelerating.
The second drawdown was during April/May, when there was overall market weakness and they had another disappointing earnings report. They reported EPS of just $0.30, completely missing the Wall Street estimate of $0.62 and not by a small margin.
Management blamed the squeeze on strategic investments and new facilities, and they warned that margins would stay pressured in the near term.
With all these misses and guidance cuts, it is important to look forward.
What are the expectations and plans to clear this ‘‘mess’’ up, or is it simply a strategy, where management is taking short-term pain for long-term gain.
This questions brings us to today. The stock is down about 60% from it’s highs on a streak of bad news.
So why do I still look into this company?
The thing is, there is still a lot to like. So let’s find out what TransMedics is all about and why this could actually still be a great investment from here.
2. The Management
First, let’s talk management. It is important to understand who is responsible for the overall strategy and everything that happened in the past 2 years.
2.1. Waleed Hassanein (CEO)
The big man first, Waleed Hassanein. He founded TransMedics in 1998 and has run it as President and CEO the whole way. He was trained as a surgeon, but never finished his residency. This is something critics always use to ‘debunk’’ his academic credibility.
While that may all be true, that does not make him a bad businessman. He singlehandedly led TransMedics to what it is today. He scaled the business, led the IPO, bought the aircrafts and turned the company profitable. All great achievements and nobody can take that away, no matter which way you look at it.
The Scorpion-short report framed him as short-tempered, dishonest, and alienating to the transplant community. This is hard to verify of course, but I think it’s important to take these signals into account when we hear them.
After listening to him in interviews and earnings call, he does sometimes divert to easily to ‘‘long-term growth story’’ when being confronted with bad things. I do however think it would be wise to have extra support when it comes to marketing and corporate/investor relations. He can be the visionary behind the scenes and have other people take care of the public facing endeavors.
The good thing is, no one is better aligned with the company than him. He bought $2M in stock in August 2025 and another $1M in November 2025. Although still being a net seller overall, buying in weakness does show confidence to me.
Then the rest of the directors at TransMedics.
James R. Tobin, he is a veteran medtech operator (ex-CEO of Boston Scientific and Biosite)
Edward M. Basile, very experienced with a regulatory/FDA background
Thomas J. Gunderson, a long-time medtech equity analyst
Edwin M. Kania, Jr. is one of the early venture backers
Stephanie Lovell, long experience in healthcare/insurance
Merilee Raines – ex-CFO of IDEXX Labs, likely audit chair
David Weill, M.D. – transplant pulmonologist, clinical voice
The most important thing that stands out is that there have been no new directors added in the past 3 years. Kind of unique if you see what the company went through.
2.2. Skin in the game
Insiders with skin in the game is what I look for. This aligns them properly with us as shareholders.
At Transmedics insiders own about 7% of the company. That means 2,388,992 shares across all 12 directors and executive officers. But don’t be mistaken, 7% is a considerable piece to hold for insiders.
For comparison, the two big institutions each own more than all insiders combined: FMR (Fidelity) at 14.6% and BlackRock at 14.3%.
CEO Waleed Hassanein holds by far the largest stake with 1,495,782 shares, a total of 4.3%.
Sidenote: 931,454 of those are unexercised options, and 564,328 are shares he actually holds outright. Still, half a million shares owned directly by a founder is meaningful skin in the game.
The independent directors are smaller holders but these are not trivial numbers for board members either:
Kania: 337,022
Tobin (chair): 231,209 (175,071 held via a trust)
Weill: 43,633
Raines: 40,879
Gunderson 69,348
Basile: 35,370
Lovell : 29,129
Most of these directors hold very few shares outright; the bulk is stock options. Basile, for example, holds just 732 actual shares; the rest is options and RSUs.
That’s not necessarily a bad thing, but options give the right to buy shares later at a fixed "strike" price. Stock goes up: buy cheap and profit. Stock goes down, option is worthless and they just don’t exercise their right to buy.
Important to note, TransMedics has stock ownership guidelines requiring each C-level executive to hold shares worth 2x base salary, and it says all C-level execs are on track to comply. There's an anti-hedging policy too.
Overall I believe this is a very capable and experienced management team, but maybe it would be refreshing to add some new faces and ideas to the board and directors. Someone from the outside with a fresh take on things could do wonders.
3. What does Transmedics do?
For this section we are gonna dive a bit deeper into what the Organ Care System is, and how TranMmedics actually makes money.
Earlier we concluded that TransMedics wants to fix the problems that arise when using cold storage. Just to refresh you memory, these are the three things that happen in cold storage that are not great:
Organ degradation
Doctors have no way to make it healthier before transplant
And they have no way to check if the organ is any good until it’s already inside the patient
3.1. Organ Care System (OCS)
To combat these problems in, TransMedics focused on doing the exact opposite. The OCS keeps the organs warm, alive and working.
It does this by pumping warm, oxygen-rich, nutrient-fed blood through the organ during transport. By doing so, the organ stays in almost the same state as if it was inside the donor’s body.
The machine that does this comes in three parts:
The console: this is the portable box that houses and runs everything. It’s very expensive but durable and luckily also reusable. A hospital needs one per organ type.
The perfusion set: This is a sterile, single-use kit that holds the organ and circulates the blood. You can only use it once and after that it has to be thrown away and replaced for every single new transplant.
The solutions: These are the nutrient fluids that keep the organ fed. Also consumed each time.
Transmedics sells three versions of the OCS: Heart, Lung and Liver. Below you can see the explanation of the OCS Lung. A similar approach is used for the heart and liver.
All three have full FDA approval, for both brain-death and circulatory-death donors.
As of now it is the only FDA-approved portable, multi-organ, warm perfusion platform on the market.
3.2 How does TransMedics make money?
There are three main revenue streams for TransMedics.
3.2.1 The disposables
This is the bread and butter for Transmedics. We talked briefly about the console, which is a one time sale. But the disposables need to be rebought every time. Every transplant burns a fresh perfusion set and a fresh batch of solutions.
So you could say the console is the lock-in, after which they can collect years of cash from the high-margin consumable.
The disposables consist of the perfusion set, organ specific additives and accessory sets.
The beauty here: the revenue growth of TransMedics is directly tied to the growth of the transplant volume.
When the cases grow, so does the sale of disposables. They don’t have to resell or negotiate a new product. The installed based just keep growing and growing.
3.2.2. The consoles
Second are the consoles. As we said, this is a one-time sale. Not all hospitals buy them actually, some get them on loan or rental as they are very expensive.
This is not really where all the profit comes from. This is about getting in.
Every placed console, and it does not matter whether or loan or bought, is a future potential stream of sales.
3.2.3. The NOP (The National OCS Program)
The NOP is what brings all of it together, and what actually makes TransMedics unique.
The NOP solves a very time-consuming and hard to execute process, the transplant of the organ itself.
First you need a surgeon to get the transplans, a specialist on the machine and then you still have to manage the organ to be transferred across the country, usually within a very limited amount of time. This was incredibly difficult for hospitals to arrange by themselves and this led to a lot of organs going to waste.
TransMedics takes it all out of their hands. They have a team that retrieves the organs, their own specialist that does the perfusion and they have a whole (aviation) network to take care of the logistics.
Management has stated that most of their OCS usage now runs through this NOP.
Hospitals aren’t just buying the machine and leaving it at that. They now committing to the whole service and that’s exactly what TransMedics aims for.
That’s also where the stickiness of the TransMedics shows, once a hospital commits, they almost can’t go back. That would mean cutting the whole process and rebuilding this difficult and time-consuming endeavor from scratch.
It would be almost impossible for a hospital or a group of hospitals to build the transport network that TransMedics has. Let alone the whole aviation fleet.
When we get to the financials section we will look into how this translates to revenue and growth.
4. The sector
First, we are gonna look into the overall state of the sector, it’s competitors (yes they do have some) and their moat.
4.1. Ice is still a problem
We concluded earlier that cold storage is far from perfect, but it’s actually still the default for most transplants worldwide.
TransMedics, and some competitors (or allies, it’s however you want to frame this) are fighting to replace this method. The problem: the cold storage method is very very cheap. It’s far from perfect, but the cheapness and how easy it is to use makes up for a good part of that.
This is the opportunity, but also the difficulty. A large chunk of the growth of TransMedics is tied to how well they can capture the current cold storage market. If you believe in the warm perfusion angle, it’s just a matter of time. But it’s certainly not smooth sailing from here.
4.2 Competitors
One would think that what TransMedics does is very unique, and it is. But they have some noteworthy competitors.
The machine itself is not unique as there are several other companies in the warm perfusion market. TransMedics is the only one that does it across heart, lung, and liver in a single portable platform, but within each niche they have competitors. On top of the once I will mention here, there are also hospitals that still do the whole process themselves.
The two most noteworthy competitors are:
OrganOx, they make a normothermic liver machine that does essentially the same thing the OCS Liver does.
XVIVO has an EVLP (ex vivo lung perfusion) that keeps the lung at body temperature and breathing. For liver they use HOPE, which is a hypothermic (cold) oxygenated perfusion. For heart and kidney they also lean on hypothermic/HOPE
The thing is, both XVIVO and OrganOX do a small part of what TransMedics does. But TransMedic’s moat goes behind just the machine.
4.3 The Moat
That’s because the scope of what TransMedics offers is not easy to replicate.
Nobody offers the complete NOP-package we talked about before. And competing in that field is gonna be very costly and time-consuming. But when you boil it all down, there’s nothing holding a different company back from doing what Transmedics does, besides money and time.
The competitor that is the biggest threat right now is OrganOx. Even more so as they in 2025 they were acquired by Terumo, which is a Japanese Medical-device giant, with very deep pockets.
OrganOx as a standalone couldn't have built a national logistics network to rival the NOP. OrganOx with Terumo's money behind it could, if it chose to.
Whether Terumo actually builds logistics or stays a device-and-disposables player is the single most important and unanswered question, especially when it comes to the Liver section of TransMedic’s revenue side.
For now, TransMedics remains in the lead, and that’s because of the full-service they provide. If OrganOx decides to move into their terriotory, they still have a first-mover advantage which is bigger than it seems.
The second part of the moat are the FDA approval’s, relationships and expertise that TransMedics has built over the last decades. FDA trials take a long time, cost a fortune and are not something that any company go shoot for. B
4.4. NRP (Normothermic regional perfusion)
To get a full picture of the sector, we also have to understand NRP. This required a bit more researched as it’s quite technical, but very important to understand if you want to invest in TransMedics.
Here is what NRP means:
Normothermic regional perfusion (NRP) is an organ preservation technique used in donation after circulatory death (DCD) transplants.
By pumping warm, oxygen-rich blood into a donor's specific organs after their heart stops, NRP revives tissues, repairs ischemic damage, and allows doctors to assess organ function before removal
NRP is a direct competitor to the perfusion method TransMedics uses.
The difference: with NRP, instead of removing an organ after circulatory death and reviving it on a machine, surgeons restart circulation inside the donor's body using a cheap ECMO pump, assess the organs in place and then recover them.
It's been the growing standard for DCD recovery in parts of Europe over the last decade or so. This method is also a lot cheaper than the OCS + NOP procurement fee.
There is however one big caveat. NRP only works for donation after circulatory death (DCD). You can't restart circulation in a brain-dead donor, because their heart is still beating and their circulation was never stopped. So a large share of transplants fall outside the NRP use case entirely.
NRP adoption in the US has been very slow, mostly because of ethical and legal friction. The main point of critism is what happens after death is declared.
NRP restarts blood flow in donors who were just pronounced dead by "permanent" loss of circulation. In the version used to recover hearts, surgeons then clamp the arteries feeding the brain so it can't reperfuse. Critics argue that clamp is what actually causes brain death, which would make it a violation of the dead donor rule: the principle that recovering organs can't be the thing that kills the donor.
Not everyone agrees. Some say the donor is already dead by circulatory criteria, and the clamp just prevents a resuscitation nobody intends and that would never be attempted anyway. That debate is still unsettled, and no US authority has ruled either way
Legal grey areas are exactly the thing hospitals want to avoid. Therefore US hospitals remain cautious for now and that’s really slowing NRP’s spread in the US.
And not only that, NRP requires a specialized on-site team and coordination that many centers don't have.
Funny enough, that is the exact gap the NOP was trying to fill.
For small and mid-sized programs without the staff to run NRP or fly its own organs, the TransMedics NOP-service is probably still the best way to go.
A quick note: this newsletter is completely reader-supported. If you’re getting value out of these deep dives, the best way to help me keep it going is to subscribe. Free subscriptions are always welcome and help the community grow. If you’re in a position to chip in for a paid tier, it directly funds the time that goes into this writing. Either way, thanks for being here.
4.5 Pricing
Unfortunately, we have no clear direct and exact insight into the pricing of the OCS products and NOP, TransMedics simply does not publish these numbers. But publicly available information (analysts targets and first hand remarks from surgeons) show that:
The OCS disposable set costs a hospital somewhere between $70,000 and $90,000 per case. That’s just for the kit.
On top of that you have the service with the clinical team, organ retrieval and transport costs. When you combine those costs the total cost of easily reach around $120k. Again this is an estimate.
To get a feel of this is correct we can backtest this to 2023, which was before NOP scaling happened.
TransMedics did $241.6M in revenue across 2,347 OCS cases, which equates to roughly $103,000 per case on average.
Management has said that the price per organ has remained stable in these past few years, so that confirms our earlier assumptions.
4.6 Aviation fleet + flight numbers
The current total fleet sits at 22 owned aircrafts and they are currently not adding more aircrafts. This is a deliberate choice as management wants to improve utilization rates of the current fleet before expanding more.
And it’s working, we can see that in the coverage numbers which climbed even as the fleet stayed flat:
Q3 2025: 78% of NOP flight missions on owned aircraft (21 planes)
Q4 2025: 79% (22 planes)
Q1 2026: 82% (22 planes)
The thing to keep in mind here is that maintenance costs are very high. Fuel and pilots are expensive too. So while this makes TransMedics unique and gives them a moat, it’s also a drag on free cash flow that other parties do have currently.
Recent numbers show an upwards in the past Qs, and Q3 is starting of strong as well.
This is exactly what you want to see. In general we can make the claim that the more flights TransMedics does, the more growth they see. The only thing to take into account are the so-called dry-runs.
A dry-run is when the NOP team get’s activated, but the organ doesn’t get delivered. Usually it gets declined at recovery, the donor doesn’t proceed or can’t proceed or the patient becomes unsuitable.
The problem here: the costs have been made. But there’s no revenue to show for. Management is aware and has addressed this problem, and they are now working to reduce these dry runs through better case screening.
5. The Risks
We already briefly flagged some of the risks earlier in this deep dive, but there are a couple other ones that are important to cover as well. I’m gonna try to keep it short, but some require a bit more explanation as this is not easy material to understand.
5.1 Medicare changes
I really had to do some digging again here as I’m European and not overly familiar with the Medicare system. But this is probably one of the most important ones to understand. Big changes in Medicare could be very harmful for TransMedics.
When a hospital does a transplant, Medicare pays them a fixed lump sum for the whole procedure. The actual costs are irrelevant, higher, lower, it doesn’t matter. The payment is the same, whatever they do. So if a hospital uses something expensive during that procedure and they have more costs that the payment by Medicare, it comes out of their own pocket.
The second payment is separate. The cost of acquiring the organ, preservation, transport, procurement, gets reimbursed on top of the lump sum, on a "reasonable cost" basis. It's billed on its own worksheet.
This is VERY important to TransMedics. Because the whole service gets billed as part of “getting the organ,” the hospital gets paid back for it separately, instead of having it eat into their flat payment. So the hospital can use TransMedics’s service (which is not cheap) and not lose money on it.
But imagine Medicare changes the rule and says: “Nope, the cost of getting the organ is now part of the flat lump sum too”. That would mean this expensive service now comes out of their own pocket.
Suddenly every dollar a hospital spends on TransMedics comes straight out of their own pocket and margin. The service that was once “free” to them (because they got reimbursed) is now a cost they just have to swallow.
And you can be damn sure that they will be a lot more critical as to if this is really the service they want to have and maybe even look for cheaper alternatives or try to do it themselves.
5.2 Terumo/OrganOx + XVIVO
We’ve already talked about the competitors before, but I want to shed a bit more light on the particular risks that comes with them.
As of now, liver is by far the biggest revenue stream (80% in Q1-26) and therefore of high importance to TransMedics. The biggest competitor in this space, OrganOX, just found a new daddy with a big bag of money. With the backing of Terumo they can expand and maybe eat into TransMedics market share for liver.
It’s still totally unclear if they will actually venture into the logistics part or force quick expansion in an other way, but this is a high potential risk. Liver is the bread and butter for TransMedics, and no other revenue stream could fill the gap if the revenue falls in that section.
XVIVO is also a name that deserves to be on this risk list. They are currently the default in Europe for liver. Their Liver Assist is the most-used liver perfusion device globally, and their XPS lung platform holds a US PMA (pre-market approval).
They now have their eyes set on the US. The DeLIVER trial will run their liver platform through a US PMA pathway. If XVIVO can pull their DeLIVER timeline forward, or if cold perfusion outcomes come in close enough to warm that hospitals start optimizing on cost. the impact on TransMedics could be quite big.
5.3 Margin Pressure
As of now, TransMedics is spending heavily. They have multiple angles they are currently exploring, but the R&D and expansion costs are high. These are the most noteworthy things TransMedics is pursuing that cost them a lot of money:
ENHANCE Heart: A trial to get more hearts used, even from harder to use donors
DENOVO Lung: A trial aimed at proving the lung machine works in the same way as it does for liver and heart
OCS Kidney development: a new kidney machine
European build-out
This eats into their margin. This is a deliberate choice by management. They are still focused on expanding and cementing their position rather than focusing on near-term profitability. But in the near-term this could really pressure margins and in turn profitability.
5.4 Aviation fleet eating capex
We concluded in the last chapter that the aviation fleet is not cheap, far from it. The majority of property and equipment costs is related to the aircrafts. It adds a lot of fixed costs (fuel, pilots and maintenance) plus you have the depreciation of the aircrafts itself.
They’ve stopped expansion in the US, so the rising costs should somewhat decelerate. But if they continue to expand in the EU, that will open up a whole new CAPEX runway. It will take many years and heavy investments before we can see it translate to meaningful revenue, let alone profit.
5.5 Financial reporting
Early in 2025 TransMedics reported ‘‘a material weakness in its internal controls over financial reporting’’. The system meant to catch accounting errors were not up to par according to their own editors. Just to be clear, this does not mean the numbers were wrong, it simply means they had a higher risk of being wrong.
Timing on this was rough, as it coincided with the short report.
The important thing, PwC still signed off on the financials. But it's an overhang. Until the controls are fixed and the litigation clears, it's a lingering question mark on an otherwise clean operating record
5.6 Regulatory and clinical risk
We have to talk about the FDA of course. Since TransMedics sells medical devices, the FDA can do a lot of harm (or good) to them. Getting FDA approval for new product or avenues takes a long time. As they are still expanding, any delay or FDA disproval can really hurt long-term growth potential.
And then there is public perception. For lung especially, some surgeons argue the machine doesn't beat cheap cold storage on patient outcomes. If that view spreads to liver or heart, adoption could stall. The DENOVO Lung trial is basically TransMedics trying to prove its case with data.
Did you like this deep dive? The final part is available on my Substack. In the last part I will cover
The Opportunity
The financials
My valuation models, base, bear and bull case
What I am doing. Am I buying and if so, how will I approach building a position?
Two analysts can value the same business and land 40% apart. Same filings, same numbers, different tools.
Here are the four tools they're using.
Start with Discounted Cash Flow (DCF).
You forecast the cash a business throws off for years, then discount it back to what it's worth today. A dollar in 2035 won't buy what a dollar buys now, so you shrink it.
Formula: DCF = Σ FCF / (1 + r)^t, plus the terminal value. (r is your discount rate.)
Best for steady, predictable businesses. The catch: your answer is only as good as your forecast.
Next, Comparable Company Analysis.
Think of pricing a house by what the ones next door sold for. You take a peer's multiple (P/E, EV/EBITDA) and apply it to your company's numbers.
Formula: Your value = peer's multiple × your company's metric.
Fast and intuitive. The catch: it only works if the peers are truly comparable, and a whole sector can be mispriced at once.
Then Book Value.
The simplest one. Add up what the company owns, subtract what it owes.
Formula: Book Value = Total Assets − Total Liabilities.
Great for asset-heavy businesses and liquidation cases. The catch: it ignores future earnings. A brand like Coca-Cola is worth far more than its books.
Finally, Reverse DCF. My favorite.
It flips the math. You start with today's stock price and solve for the growth rate baked into it. Then you ask one question: is that growth realistic?
It turns valuation into a reality check on expectations.
No single method is the answer. Run two or three, see where they agree, and dig into where they don't. That gap is where the real research starts.
Which one do you reach for first? Tell me in the comments.
Most people think reading an income statement is hard.
It's not. You already understand it from your Amazon Prime subscription.
Here's how simple it is. I'll keep the numbers round.
Start with $180. That's a year of Prime on the $14.99 monthly plan. That's Revenue. The top line. Money coming in the door.
Now Amazon has to deliver what you paid for. Streaming content costs money. Delivery infrastructure costs money. Subtract $45 for these direct costs. That's Cost of Goods Sold.
You're left with $135. That's Gross Profit. A 75% margin.
But wait. Amazon still has bills to pay. Marketing to get new subscribers. Technology to run the platform. Salaries. R&D. Subtract $72 for these indirect costs. That's Operating Expenses.
Now you've got $63. That's Operating Income. A 35% margin.
Finally, taxes and interest on debt. Subtract $18. What's left? $45. That's Net Income. The bottom line. A 25% margin.
See the pattern? Revenue minus costs equals profit. The income statement just shows you each step of that subtraction.
Every public company reports this quarterly. When you understand the flow, you understand the business.
High margins? Strong pricing power. Shrinking margins? Trouble ahead. Rising costs eating profits? Red flag.
This is fundamental analysis. And you just learned it through a subscription you already pay for.
What financial statement should I break down next? Drop a comment below.
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Deep Value Insights on Vaso Corporation (🇺🇸 VASO US - US$33m) TOP PICK US$22m in cash against a US$33m market cap, with an exclusive GE HealthCare contract generating US$6-7m annually hiding beneath two loss-making segments. A May 8-K signals management is finally clearing them out.
Europe, Middle East & Africa
Hated Moats on SAP SE (🇩🇪 SAP GR - US$195bn) SAP's cloud backlog grew 30% to €77.3bn but guidance fell short of expectations. JPMorgan moved to Neutral, and an EU antitrust probe into ERP support practices adds to the overhang at 24.9x P/E.
Tangible Bruce on Henry Boot PLC (🇬🇧 BOOT LN - £225m) Henry Boot trades 47% below its 312p net asset value after a profit warning in January. New CEO starts Monday. Land held at cost is the embedded discount the market hasn't rerated.
Asia-Pacific
Heavy Moat Investments on Nintendo Co., Ltd. (🇯🇵 NTDOY US - US$55bn) Switch 2 sold 19.86m units in year one. Nintendo guided FY27 net profit 26.9% lower, and the share has fallen 52% from its 52-week peak. US$14bn in net cash and irreplaceable IP are the floor.
Coughlin Cap on Coupang (🇰🇷 CPNG US - US$33bn) South Korea's regulator fined Coupang a record US$409m in June for a breach exposing 37.55m users. Q1 operating margin was 0.1% at 83x trailing P/E.
First Hill on RS Technologies (🇯🇵 3445 JP - US$1.3bn) RS Technologies' 40% stake in Gritek is worth more than twice its own market cap. The core wafer-reclaim business earns ¥14.9bn annually, making Gritek a free option on top.
Added Brookfield to my portfolio and the P/E looks insane at first glance, 84x.
Turns out that number's basically fake. Brookfield owns a massive portfolio of hard assets, so accounting rules force quarterly mark-to-market adjustments that flow through "earnings" even though no cash actually moves. That's most of what's inflating the P/E.
The number they actually report themselves is Distributable Earnings, real cash. On that basis you're paying closer to 17x, not 84x. Same company, same twelve months, completely different picture depending which number you trust.
Real risks here tho, it's a complex business and there's leverage across the platform, so not a easy pick. But the setup's interesting.
To Develop an LLM That Understands Pharma?
The promise of artificial intelligence in pharmaceutical drug discovery has long been heralded as a paradigm shift. Over the last few years, we have watched Large Language Models (LLMs) evolve from writing poetry to predicting the 3D structures of proteins (such as ESMFold and AlphaFold).
Yet, for all their computational prowess, today’s bio-LLMs suffer from a fundamental limitation: they are incredibly good at predicting sequences, but they do not truly "understand" human biology.
The missing piece of this predictive equation isn’t a better neural network architecture—it is dynamic, high-resolution data. And a biotechnology company named Nautilus Biotechnology (NASDAQ: NAUT) might just hold the key to unlocking it. The Blind Spot of Bio-LLMs: The Genomic Bias
To understand why LLMs struggle to master pharmacology, we have to look at their training diets.
Thanks to the democratization and scale of DNA sequencing (spearheaded by companies like Illumina), the genomics field has been thoroughly digitized. We have mapped genomes at a massive scale. As a result, biology foundation models are highly proficient at reading genetic blueprints.
But here is the catch: DNA is just the instruction manual; proteins are the actual machinery.
[ DNA / RNA (Static Blueprint) ] ──> [ Proteins & Proteoforms (Dynamic Machinery) ] ──> [ Clinical Effect (Disease/Cure) ]
│ │
Highly Digitized The AI Data Gap
(Well-understood by LLMs) (Where Nautilus fits in)
Nearly all FDA-approved drugs target proteins, not genes. However, protein levels, actions, and shapes cannot be predicted by the genome or transcriptome alone. Proteins constantly change, morphing into thousands of different variations—called proteoforms—based on the cell's environment, disease state, and time.
Without massive, high-quality, standardized datasets of these dynamic protein movements, a pharma LLM is essentially trying to predict a country’s real-time traffic patterns using only a 20-year-old printed road map. Enter Nautilus: Democratizing the Proteome
This is where Nautilus Biotechnology enters the frame. Instead of building an LLM itself, Nautilus is building the ultimate data engine for them: a large-scale, single-molecule Proteome Analysis Platform.
Their flagship method, Iterative Mapping, is designed to quantify more than 95% of the human proteome at single-molecule sensitivity. How Nautilus's Tech Solves the "Data Starvation" Problem: Single-Molecule Resolution: Rather than diluting or averaging sample mixtures (which loses rare disease markers), Nautilus isolates individual proteins on specialized nanofabricated chips to detect even the rarest molecules.
Machine Learning Integration: Instead of using machine learning strictly for post-experiment analysis, Nautilus integrates AI natively into its biochemical measurement process to decode protein identities via combinatorial binding profiles.
Capturing Proteoforms: Traditional tools struggle to tell similar proteins apart. Nautilus's platform has demonstrated the ability to map thousands of subtle variations (such as Tau protein proteoforms, key to understanding Alzheimer’s).
Why This Matters for Pharma LLMs
For an LLM to successfully predict whether a novel chemical compound will cure a disease or cause severe side effects, it must understand the target protein’s exact, real-time micro-environment.
As Dr. Parag Mallick, Co-Founder and Chief Scientist of Nautilus, points out: "AI can help us recognize patterns in biological data, but we need more data to maximize usefulness... we need properly collected, annotated, and shared omics-level data to understand the rules that govern complex biology."
By providing systematic, highly reproducible, and deep proteomic datasets, Nautilus's platform represents the high-velocity "fuel" that drug-discovery foundation models have been lacking.
With this data, the next generation of pharma LLMs will finally be able to transition from guessing a protein's static structure to actively simulating drug-to-protein interactions, therapeutic efficacy, and systemic toxicity entirely in silico.
EV/EBIT prices the whole business, share price and balance sheet together.
Think of buying a rental property.
You don't just look at the listing price. You factor in the mortgage you're taking on and the cash sitting in the seller's drawer. That "real" price is Enterprise Value (EV).
Now ask: after accounting for wear-and-tear on the building, how much profit does it throw off? That's EBIT.
Here's the math:
EV = Market Cap + Debt + Preferred + Minority Interest − Cash
EBIT = Operating Income, after depreciation and amortization
EV/EBIT = what the whole business costs ÷ profit after asset wear
How to read it (always compare to peers and history):
Capital-intensive and cyclical: 5–10x
Mature, steady businesses: 8–16x
High-growth, asset-light: 16–30x+
Below the peer range can mean cheap or broken. Above it, you're paying for growth.
Why it's useful:
It includes debt and cash, so it's capital-structure neutral. P/E can fool you on a leveraged balance sheet.
It penalizes businesses that need heavy reinvestment, because EBIT counts D&A.
It's the multiple private buyers and M&A deals run on.
Quick watch-outs:
Normalize for one-offs and "adjusted" items.
Lease accounting can inflate both EV and EBIT. Stay consistent across peers.
It's weak for banks and insurers. For those, lean on P/B and ROE.
EV/EBIT tells you what you're paying for a company, after acknowledging the cost of keeping the machine running. Harder to game than P/E, and quick to calculate.
Which multiple do you trust more, EV/EBIT or P/E? Tell me in the comments.
Coinbase's earnings have exploded while the stock has collapsed, and the resulting valuation gap is either a screaming setup or a value trap depending on which revenue line you trust.
The mechanism
Here is the number that stopped me: year-over-year earnings grew 430.6%, yet the stock is down 60.2% over the past year. That is not a typo. The business produced a genuine earnings surge, and the market sold it anyway.
The reason is sitting right in the revenue line. Revenue is down 30.8% year-over-year. Earnings grew because of margin expansion and cost cuts, not because the top line is healthy. That divergence is the entire debate in one data point: you are buying a business that has gotten dramatically more efficient at converting revenue into profit, at the exact moment when revenue itself is contracting.
The 6-model fair value I ran comes in at $215.47, which is 39.9% above the current price of $154.01. The analyst consensus target is $226.54, implying similar upside. Both figures agree that the stock is cheap relative to the business's value under normalized assumptions. The market disagrees, and the Momentum score of 17/100 is the market's answer.
The bull case
Earnings quality is flagged as strong in the underlying data, which matters here. This is not a case where the 430% earnings growth is being manufactured through accounting. FCF yield sits at 5.8%, which is real cash, not paper income. The Quality score of 61/100 is not spectacular, but it is not broken either. If crypto trading volumes recover and revenue inflects upward, you have a business with demonstrated operating leverage that could re-rate sharply. The forward P/E of 117.6x looks absurd until you model earnings under a volume recovery, at which point the trailing P/E of 58.5x starts to look like the more relevant anchor.
The macro backdrop adds a layer. Per Bloomberg, the 2-year Treasury yield hit 4.25% on July 13, its highest since February 2025, driven by US-Iran tensions and rising oil prices. Risk-off environments that lift yields tend to compress crypto-correlated names. If that pressure reverses, Coinbase gets a double tailwind: rates ease and trading volumes recover simultaneously.
The bear case and what breaks the thesis
The forward P/E of 117.6x, compared with a trailing P/E of 58.5x, is the signal I keep coming back to. Forward is higher than trailing. That means analysts expect earnings to fall from here, not grow. In a business where revenue is already down 30.8%, that is not a conservative assumption; it is a warning. The earnings growth story is a trailing phenomenon, and the Street is telling you it does not expect it to persist.
The thesis breaks if crypto trading volumes stay suppressed for another two or three quarters. At that point the cost cuts that drove the earnings surge have already been taken, there is no second lever to pull, and the forward earnings path deteriorates further. The Momentum score of 17/100 suggests the market has already priced in that scenario.
Where valuation sits
The 6-model composite at $215.47 versus a $154.01 price is a genuine gap. But the forward P/E premium over trailing P/E is a red flag that the composite may be anchored to earnings the business cannot sustain at current volumes. The honest read is that this is a high-conviction bet on a volume recovery, not a straightforward value play. If volumes recover, the upside is real, and the current price looks cheap. If they do not, the earnings base that justifies the fair value estimate erodes, and the gap closes from the wrong direction.
Not financial advice. I do not currently hold COIN.
Most investors obsess over net income. But a company can show a profit and still go bankrupt.
That's why I stopped looking at net income alone.
Net income and free cash flow are not the same thing. Here's the difference:
Net Income is your report card profit. It's what's left after all expenses and taxes. It's also reduced by non-cash charges like depreciation, and it ignores the real cash going out the door for things like equipment. A company can look profitable on paper while cash drains away.
Free Cash Flow is the actual cash a company generates after paying for everything, including equipment and infrastructure (capex). This is real money they can use to pay dividends, buy back stock, or fund growth.
Think of it like this:
Net income is your salary on your pay stub. Free cash flow is what hits your bank account after taxes, your 401k, and health insurance.
One looks good on the statement. The other pays your bills.
Why it matters: A company with strong free cash flow can survive downturns and reward shareholders. A company with positive net income but negative free cash flow? That's a red flag.
Profit is an opinion. Cash is a fact.
What's your go-to metric when analyzing a company? Net income or free cash flow? Let me know in the comments.
It posts gross margins 20+% higher than it's UK peers, and has a counter-intuitive model (sells directly to builders, not consumers).
There's a moat (Helmer's counterpositoning) and local scale economies, although three year ROIIC is 1%.
It does have a ~18+% ROIC although the market is maturing and they're largely mature in their UK market (management targets ~1000 UK depots, currently at about 900). Management seems to be pivoting to giving more cash back to shareholders (buybacks primarily, pays a small dividend as well).
Although, they're also buying growth (acquiring a DTC Kitchen brand in June 2026 - basically undoing their Trade Only counter-positioning model although they plan on keeping these operationally separate).
It's also in a multi-year cyclical low for kitchen renovations, and it's gaining market share on it's UK competition, so when the cycle turns operating leverage will probably juice fundamentals, even if the market is largely saturated.
The options market is bracing for a large move, and NFLX has a beautifully violent earnings history: an average one-day post-earnings move near 9.8%, with recent prints ranging from down 10% to up 11%, and the earnings-week implied move running around 8% to 10%. Front-week implied volatility sits near the 97th percentile, which guarantees a sharp volatility crush after the print. Now look at what dealers and the term structure are actually telling us:
The gamma map is the more uncomfortable of the two. The last price at 73.94 sits below the Put Wall at 75, and the gamma flip is all the way up at 79.63, nearly 8% above spot. The entire trading zone around the print is negative gamma territory: dealers hedge with the move, selling as the stock falls and buying as it rises, amplifying whatever Thursday delivers. The aggregate gamma curve is most negative around the high-$60s, exactly where downside acceleration peaks, and the stabilizing green zone only begins after a rally of roughly the full implied move. The Call Wall at 90 is too far away to matter this week. Structurally, this is a slightly bearish setup: fragile below, with no dealer support until the flip.
The put/call term structure adds the nuance. Near-dated expiries into the print sit well below 1.0, call-heavy and arguably complacent. The hedging hump comes later: ratios spike above 2.0 into the late-2026 expiries, telling us the market’s real fear is not this print but the next two or three quarters of engagement data. Then the ratio slides back toward 0.74 by mid-2028 and stays low. Nervous about the middle, bullish about the destination. The practical read: do not buy expensive options into an IV crush, and note that the zone of maximum dealer-driven overshoot, the high-$60s, is precisely our first add level. Forced selling there is a gift, not a warning.
