Wall Street hates the current narrative, but Peter Lynch built his career buying 'scary' stories with pristine balance sheets. Does this 10x P/E casino giant pass the Magellan test?
Interesting post. I literally just commented about sin stocks on @Eugene Ng's note 10 mins ago. There are always better opportunities out there but it's certainly an interesting case study.
The executive team confirms the existing problems in Asia, stating that money is not an issue and that they have invested heavily in increasing security, although they also indicate that it will not be easy. In my case, I intend to continue strengthening my position; in my opinion there is a real asymmetry between price and value. I estimate that at this moment we are paying below the earnings power value, effectively getting the growth for free. This is for a business with competitive advantages based on economies of scale, strengthened by moderate customer loyalty, some network effects, and technological ownership. The U.S. market is now expanding and being regulated, which is precisely the type of environment where Evolution AB feels most comfortable. I am in this company for the long term.
I’m curious to see where you all land on this one.
The math (PEG Ratio) clearly says 'Wait,' but the valuation (10x P/E) feels like a mispricing for a business with 66% margins.
Are you siding with Lynch’s discipline (wait for the growth to prove itself), or are you buying the dip before the 'Asia Issue' gets resolved? What do you think: is this a value trap or a gift?
Spot on. The PEG ratio is blind to context; it cannot distinguish between a car in the shop for repairs and one that is totaled.
I’m right there with you on the 'fixable' nature of the Asia issue. The margins prove the machine is still working; it’s just hitting a regulatory speed bump. It is uncomfortable to buy when the growth chart looks ugly, but that is usually where the mispricing lives.
Excellent write up - loved the creativity in approach along with solid analysis. I'm a fellow shareholder!
Thank you, glad you enjoyed it 🙏
Interesting post. I literally just commented about sin stocks on @Eugene Ng's note 10 mins ago. There are always better opportunities out there but it's certainly an interesting case study.
Great article. I also invested in Evolution but I have to admit that the Asian headache has been worse than I had anticipated.
The executive team confirms the existing problems in Asia, stating that money is not an issue and that they have invested heavily in increasing security, although they also indicate that it will not be easy. In my case, I intend to continue strengthening my position; in my opinion there is a real asymmetry between price and value. I estimate that at this moment we are paying below the earnings power value, effectively getting the growth for free. This is for a business with competitive advantages based on economies of scale, strengthened by moderate customer loyalty, some network effects, and technological ownership. The U.S. market is now expanding and being regulated, which is precisely the type of environment where Evolution AB feels most comfortable. I am in this company for the long term.
Fantastic post, thanks.
Glad you enjoyed it, Joel!
I’m curious to see where you all land on this one.
The math (PEG Ratio) clearly says 'Wait,' but the valuation (10x P/E) feels like a mispricing for a business with 66% margins.
Are you siding with Lynch’s discipline (wait for the growth to prove itself), or are you buying the dip before the 'Asia Issue' gets resolved? What do you think: is this a value trap or a gift?
https://open.substack.com/pub/miguelteixeira1984/p/evolution-ab-the-netflix-of-live?r=14j4bt&utm_medium=ios&shareImageVariant=overlay
Spot on. The PEG ratio is blind to context; it cannot distinguish between a car in the shop for repairs and one that is totaled.
I’m right there with you on the 'fixable' nature of the Asia issue. The margins prove the machine is still working; it’s just hitting a regulatory speed bump. It is uncomfortable to buy when the growth chart looks ugly, but that is usually where the mispricing lives.