Once in a while one should study the company which lacked the execution, which always over-promised and under delivered. Check how market valued it over the period of time. As it gives us the framework to avoid potential capital allocation mistakes i future. 🧪⚗️

Net Profit vs Cash Flow from operations (CFO) - What is more important?

A short thread with examples

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1. Net income is the profit a company has earned for a period, while cash flow from operations measures the cash going in and out during a company's day-to-day operations i.e., the cash which is generated through its core business.

2. Net income is calculated by subtracting the cost of goods sold, operating expenses, depreciation & amortization, interest expense and taxes from total revenue.

3. Cash flow from operations is calculated by adding the non-cash expenses such as depreciation and amortization to the net profit and then subtracting the changes in working capital.

Now lets understand few differences between Net Profit and Cash Flow from operations (CFO)

1. Net profit is recorded on an accrual basis whereas CFO deals with only cash items. Income earned is recorded in the net profit even if cash is not received

Thread on Drug Development process 🧵

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@unseenvalue

Topics Covered :
1.Introduction to CRO,CDMO,CMO & CRAMS
2.Discovery
3.Clinical Trials
4.Commercialization and Surveillance
5.Success Rates
6.CRO
7.CMO
8.CDMO
9.CRAMS

1. Introduction :
What are CROs, CDMOs, CMOs and CRAMS? How are they different from each other and what value do they add to the Pharma Value Chain? To understand these concepts, we took a look at the drug discovery process.

The APIs manufactured by our Indian players lie at the end of this value chain. There is a whole process that comes before it that takes a lot more time and costs a lot of money.

On average, it takes about 10 to 15 years for a drug to make it to market. It costs hundreds of millions, if not billions of dollars to bring one drug to market.

A drug goes through 3 big phases on it’s way to make it to market - the discovery phase, clinical testing phase and the commercialization phase. Once we understand these phases, it makes it easy to understand the role of CROs and CDMOs

#IGX (Indian Gas Exchange) Revenue Calculation

Watch this video to understand #IEX(Indian Energy Exchange) Business model
Link : https://t.co/rqll7Ct9Cn

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Unique Business Model
#Tipsindustries

CMP- Rs 1296

A Thread 🧵

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@NeilBahal

Topis covered:
1. Tips Industries Overview
2.Music Segment
3.Monetization
4. Tips Business Model
5.Acquisition Cost
6. Tips Film Business
7. Tips YouTube

8. Why Should Artists Choose Tips Over Other Labels?
9.Financials
10.Future Growth
11.Content Acquisition
12. Conclusion

1. Tips Industries Overview
It was founded by Kumar S. Taurani and Ramesh S. Taurani in 1975.
In 1975, the Taurani brothers used to trade

in LP’s (Long Playing Phonograph Records) for three of the biggest companies in India – HMV, Music India & CBS. By 1977, they had become the biggest dealers for these companies in Western India.
Driven by the ambition of both the brothers started their own record label.

TIPS Industries Limited is a leading Indian music label which creates and monetises music. Apart from music segment it is also into Film Production,Film Distribution & Film Promotion

2. Music Segment
Tips has an extensive catalog of film, non-film, devotional, pop & remixes

Tips has a library with more than 29,000 songs, Tips has a very fresh catalog with songs released in 2000 and most major hits of the 90s. Tips has a major Atif Aslam Library.

3. Monetization
Tips monetizes its songs just like other music labels i.e through distribution deals

@soicfinance @suru27 Indeed. For later, industry/sector has to be within your circle of competence to judge the turnaround correctly.

Because according to Warren Buffett
"Both our operating and investment experience cause us to conclude that turnarounds seldom turn"

@unseenvalue Got it sir 🙏

@dollarsanddata In early 2000, a company where I used to work wanted to go public. The investment bankers looked at the numbers and said, YOU ARE PROFITABLE?! ARE YOU CRAZY? YOU CANNOT IPO UNLESS YOU ARE LOSING MONEY.

I’m paraphrasing, but not by much.

The company dutifully piled on huge expenses so it could lose money.

Then the IPO window closed when Nasdaq imploded.

The company was never the same again.

As investors, we need to qualify the companies in our portfolio.

If they don't meet our cut, we don't invest in them.

Apart from the eventual/current profitability and strong balance sheet, growth is my top requirement.

Here's why:

1/ If a business does not grow, its share price will not grow.

In a corporate lifecycle, a company experiences most growth during its expansion phase. That's where most returns are being created.

This is why high growth companies deliver huge returns.

source: Ravi Kumar

2/ The compounding of growth rates is often underestimated.

It can do wonders for your company.

Growing at 30% turns $1 to $13.79 by Y10.

Growing at 10% turns $1 to $2.59 by Y10.

The share price returns a company can generate based on this is significant.

3/ Here's an example: Crowdstrike $CRWD

It grew its ARR from $71 million in 1Q 2018 to $1,731 million in 4Q 2022.

The magic of compounding.

4/ Simple Back Test

I used my Capital IQ to find out what are the stocks that delivered more than 10x returns in the past 5 years and have at least a market cap of $600m USD.

There are 13 companies.

$APPS $XPEL $TSLA

1/ Howard Marks once said that before buying an asset, above anything, he wants to know “the amount of optimism that’s in the price.”

All investors can do this with a handy tool: The Reverse DCF.

I'll also leave a download link to my compact DCF Model at the end of this thread.

2/ We all know a regular DCF. But's what a "Reverse DCF"?

If we consider that a DCF is a Linear Equation, we could say the 'X' (The unknown variable) is the Intrinsic Value.

In a Reverse DCF, we start with the Market Price and try to find some other variable, say Sales Growth.

3/ Let's start by taking an example: VST Industries, a Cigarette-maker based in India.

I valued them on my blog a while ago. I'll be retaining the old assumptions, but using the latest financials.

So please note that the Valuation isn't accurate

4/ This is a "Regular DCF" of VST Industries. The Assumptions I've made indicate an Overvaluation.

The Intrinsic Value is Rs. 3,012, but the Market Price is Rs. 3,492.

Let's not dwell on whether this is correct, since we discussed earlier that this isn't an accurate Valuation.

5/ If we want to do a "Reverse DCF" instead, we need to pick a different variable to 'find'. Say, I will pick the Sales Growth numbers.

I will now remove the Sales Growth numbers from the Model and assume that Sales Growth is the same across the years for ease of calculation.