Summer Game
17 August 2021
It's summertime, time to check off crosswords and sudokus on a mattress by the beach. And at Monocle, we want to contribute to the war effort: here's a little valuation quiz to see if you'd make a good investor on Wall Street these days.
Chewy is a company created ten years ago. It's the Amazon of pets: you order kibble, baskets, toys, etc., and it's delivered to your home. On its last results, Chewy is on an annual rhythm of $9.0 Mds of turnover. Of course, it has to pay the manufacturers of these products: about $7.0 Bn for the year. This leaves $2.0 billion in gross margin. Then we have to pay the overheads, advertising etc... And if we finish the year just above zero in net income, it will be good.
Question 1 : How much do you value Chewy?
- Answer A : $ 5.0 Billion
- Answer B : $10.0 Billion
- Answer C : $20.0 Billion
Shopify is a tech company that makes it easy for anyone to start an online business. The service works by subscription, so the indicator to follow is the annual volume of subscriptions. At the end of June, the company posted $95M for the month, which is an annual rate of $1.1 billion.
Question 2 : How much do you value Shopify?
- Answer A: $ 5.0 Billion
- Answer B : $10.0 Billion
- Answer C : $20.0 Billion
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Answers
1/ Chewy Chewy: neither A, nor B, nor C, we're at $38 Billion (and this after a 4% drop on yesterday's session)
2/ Shopify : neither A, nor B, nor C, but $190 Bn. No comment.
Conclusion: Whether you have a majority of A's, B's or C's, you are well below the current valuation levels. Add a zero and you're fine.
All in all, Sudoku is probably a more relaxing exercise...
Charles
Disclaimer
This presentation is a promotional document. The content of this document is communicated by and is the property of Monocle Asset Management. Monocle Asset Management is a portfolio management company approved by the Autorité des Marchés Financiers under number GP-20000040 and registered with the ORIAS as an insurance broker under number 10058146. No information contained in this document should be construed as having any contractual value. This document is produced for information purposes only. The prospects mentioned are subject to change and do not constitute a commitment or a guarantee. Access to the products and services presented here may be subject to restrictions for certain persons or countries. Tax treatment depends on individual circumstances. The fund mentioned in this document (Monocle Fund SICAV) is authorized for marketing in France and possibly in other countries where the law permits. Before making any investment, it is advisable to check whether the investor is legally entitled to subscribe to the fund. The risks, costs and recommended investment period of the funds presented are described in the KIDD (key investor information documents) and the prospectus, available free of charge from Monocle Asset Management and on the website. The KIDD must be given to the subscribers before the subscription. Past performances are not a reliable indicator of future performances. Monocle Asset Management cannot be held responsible for any decision taken or not taken on the basis of information contained in this document, nor for the use that could be made by a third party. The investor may lose all or part of the amount of capital invested, as the funds are not capital guaranteed.
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