ULTA Stock Study (10-15-25)

I recently did a stock study on Ulta Beauty, Inc. (ULTA, $541.01). Previous studies are here, here, here, and here.

M* writes:

     > Ulta Beauty is the largest specialized beauty retailer in the US
     > with about 1,500 freestanding stores. The firm offers cosmetics
     > (39% of 2024 sales), fragrances (13%), skin care (23%), and hair
     > care products (19%). It also has salon services, including hair,
     > makeup, skin, and brow, that account for about 4% of its revenue
     > and drive traffic. Outside of the US, Ulta acquired premium beauty
     > retailer Space NK and its 83 stores in the UK and Ireland in 2025,
     > is opening franchised stores in Mexico, and has formed a joint
     > venture to expand into the Middle East. In addition, Ulta collects
     > royalties through its Target partnership (set to end in 2026) and
     > credit card revenue.

Over the past decade, this large-size company grows sales and earnings at annualized rates of 12.0% and 19.5%. Lines are mostly up, straight, and parallel except for a sales+EPS dip in ’21 and EPS dip in ’25 [FY ends Jan 31; references to year from Value Line (VL) and BI website incremented to match]. Five- (10-) year EPS R^2 is 0.63 (0.54) and VL gives an Earnings Predictability score of 45.

Over the past decade, PTPM leads peer and industry averages by increasing from 12.9% (’16) to 14.0% (’25) with a last-5-year mean of 12.8%. ROE also leads peer and industry averages by increasing from 20.3% (’16) to 50.5% (’25) with a last-5-year mean of 46.5%. Debt-to-Capital is less than peer and industry averages despite increasing from 0% (’16) to 43.6% (’25) with a last-5-year mean of 48.4%.

Current Ratio is 1.39 and Quick Ratio is 0.21 per M* who assigns a “Narrow” Economic Moat, rates the company “Exemplary” for Capital Allocation, and gives a B grade for Financial Health. VL gives a B++ rating for Financial Strength. Interest Coverage is undefined as the company has no long-term debt.

With regard to sales growth:

• YF projects YOY 6.6% and 5.2% for ’26 and ’27, respectively (based on 22 analysts).
• Zacks projects YOY 6.8% and 5.3% for ’26 and ’27, respectively (9 analysts).
• VL projects 5.1% annualized growth from ’25-’30.
• CFRA projects 6.5% YOY and 5.2% per year for ’26 and ’25-’27, respectively.
• M* provides a 2-year ACE of 6.5% and projects 10-year annualized growth of 6.0% in its analyst note.

I am forecasting below the range at 5.0%.

With regard to EPS growth:

• MarketWatch projects annualized growth of 3.3% and 6.1% for ’25-’27 and ’25-’28, respectively (based on 28 analysts).
• Nasdaq.com projects 10.8% YOY and 14.0% per year for ’27 and ’26-’28 (13, 13, and 5 analysts for ’26, ’27, and ’28).
• Seeking Alpha projects 4-year annualized growth of 6.2%.
• Finviz provides ACE 5-year annualized growth of 5.8% (6).
• Argus projects 5-year annualized growth of 12.0%.
• YF projects YOY 3.4% contraction and 10.6% growth for ’26 and ’27 (19).
• Zacks projects YOY 4.0% contraction and 10.8% growth for ’26 and ’27 (13) along with 5-year growth of 7.5%/year.
• VL projects 6.4% annualized growth from ’25-’30.
• CFRA projects 3.3% YOY contraction and 1.5% growth per year for ’26 and ’25-’27 along with a 3-year CAGR of 1.0%.
• M* projects long-term annualized growth of 9.2%.

My 5.0% per year forecast is below the long-term-estimate range (mean of six: 7.9%). I will use ’25 EPS of $25.34/share as the initial value rather than 2026 Q2 EPS of $26.08 (annualized).

My Forecast High P/E is 21.0. Over the past 10 years, high P/E falls from 37.8 (’16) to 22.7 (’25) with a last-5-year mean of 22.2 (excluding 99.8 upside outlier in ’21) and a last-5-year-mean average P/E of 18.1 (also excluding ’21 low P/E). I am below the range.

My Forecast Low P/E is 12.0. Over the past 10 years, low P/E falls from 24.2 (’16) to 12.6 (’25) with a last-5-year mean (excluding 39.9 upside outlier in ’21) of 14.1. I am forecasting below the range.

My Low Stock Price Forecast (LSPF) of $304.10 is default based on initial value given above. This is 43.8% less than the last closing price and 1.6% less than the 52-week low.

These inputs land ULTA in the HOLD zone with a U/D ratio of 0.6. Total Annualized Return (TAR) is 4.7%.

PAR (using Forecast Average—not High—P/E) of NEGATIVE 0.3% is unacceptable as a potential stock investment. With a healthy margin of safety (MOS) I can proceed based on TAR, but even that is less than I seek from a large-size company.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 96 studies (my study and 21 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 4.5%, 5.8%, 21.8, and 14.1, respectively. I am lower except for sales (5.0%). VL’s projected average annual P/E of 18.0 is about equal to MS and higher than mine (16.5).

MS high / low EPS are $34.00 / $25.36 versus my $32.34 / $25.34 (per share). My high EPS is less due to a lower growth rate. VL’s high EPS of $34.60 is greater than both.

MS LSPF of $350.50 implies a Forecast Low P/E of 13.8: less than the above-stated 14.1. MS LSPF is 2.0% less than the default $25.36/share * 14.1 = $357.58 resulting in more conservative zoning. MS LSPF is 15.3% greater than mine, however.

With regard to valuation, PEG is 3.0 and 4.0 per Zacks and my projected P/E, respectively: significantly overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is slightly elevated at 1.14.

MOS is robust because my inputs are near or below respective analyst/historical ranges and MS averages. MS TAR of 6.7% is 2.0% per year greater than mine.

VL notes the stock has surged ~40% since being upgraded to Timeliness rank of 1 in mid-May.

Per U/D, ULTA is a BUY under $412/share. BI TAR criterion is met ~ $339 given a forecast high price ~$679 (no dividend).

Disclaimer: I own shares in this security.

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CPRT Stock Study (10-14-25)

I recently did a stock study on Copart, Inc. (CPRT, $44.07). The previous study is here.

M* writes:

     > Based in Dallas, Copart operates an online salvage vehicle auction
     > with operations in 11 countries across North America, Europe, and the
     > Middle East, facilitating over 3.5 million transactions annually. The
     > company utilizes its virtual bidding platform, VB3, to connect vehicle
     > sellers with over 750,000 registered buyers around the world. Buyers
     > primarily consist of vehicle dismantlers, rebuilders, individuals
     > and used vehicle retailers. About 80% of Copart’s vehicle volume is
     > supplied by auto insurance companies holding vehicles deemed a
     > total loss. Copart also offers services such as vehicle transportation,
     > storage, title transfer, and salvage value estimation. The company
     > primarily operates on a consignment basis and collects fees based
     > on the vehicle’s final selling price.

Over the past decade [FY ends Jul 31], this medium-size company has grown sales and earnings at annualized rates of 16.2% and 21.3%. Lines are textbook up, straight, and parallel. Value Line (VL) gives an Earnings Predictability score of 95.

Over the past decade, PTPM leads peer/industry averages while increasing from 31.2% (’16) to 40.8% (’25) with a last-5-year mean of 40.3%. ROE also leads peer/industry averages despite falling from 30.4% (’16) to 17.5% (’25) with a last-5-year mean of 22.3%. Debt-to-Capital is less than peer/industry averages while falling from 45.3% (’16) to 1.1% (’25) with a last-5-year mean of 4.0%.

Quick Ratio is 8.1 and Interest Coverage is N/A (debt-free as of FY 2025) per M* who gives a Financial Health grade of A (per BI website), rates the company “Standard” for Capital Allocation, and assigns a “Wide” Economic Moat. VL grades the company B++ for Financial Strength.

With regard to sales growth:

• YF projects YOY 4.8% and 7.9% for ’26 and ’27, respectively (based on 9 analysts).
• Zacks projects YOY 4.8% and 6.6% for ’26 and ’27, respectively (2 analysts).
• VL projects 3.8% annualized growth from ’25-’29.
• CFRA projects 11.3% YOY and 7.7% per year for ’26 and ’25-’27, respectively.
• M* provides 2-year annualized ACE of 6.6%.

My 3.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 10.4% and 11.5% per year for ’25-’27 and ’25-’28, respectively (based on 14 analysts).
• Nasdaq.com projects 11.3% YOY for ’27 (2 analysts).
• Seeking Alpha projects 4-year annualized growth of 13.0%.
• Argus projects 5-year annualized growth of 10.0%.
• Finviz projects 5-year annualized growth of 10.6% (3)
• YF projects YOY 6.5% and 11.4% for ’26 and ’27, respectively (10).
• Zacks projects YOY 5.7% and 11.3% for ’26 and ’27 (2).
• VL projects 5.9% annualized growth from ’25-29.
• CFRA projects 13.2% YOY and 12.2% per year for ’26 and ’25-’27, respectively.
• M* gives long-term ACE of 7.4%.

My 6.0% forecast is near bottom of the long-term-estimate range (mean of five: 9.4%). Initial value is ’25 EPS of $1.59/share.

My Forecast High P/E is 23.0. Over the past 10 years, high P/E increases from 23.2 (’16) to 40.5 (’25) with a last-5-year mean of 38.6 and last-5-year-mean average P/E of 31.8. I am near bottom of the range (only 19.4 in ’17 is less).

My Forecast Low P/E is 17.0. Over the past 10 years, low P/E increases from 14.6 (’16) to 28.4 (’25) with a last-5-year-mean of 25.1. I am forecasting toward bottom of the range (only ’16 and 14.9 in ’17 are less).

My Low Stock Price Forecast (LSPF) is $31.00. Default $27.00 based on initial value from above seems unreasonably low at 38.7% (38.2%) less than the previous close (52-week low). My arbitrary selection is 29.7% (29.1%) less.

These inputs land CPRT in the SELL zone with a U/D ratio of 0.3. Total Annualized Return (TAR) is 2.1%.

PAR (using Forecast Average—not High—P/E) of NEGATIVE 0.7% is not viable as an investment candidate. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR but even that is less than current risk-free rate (T-bills).

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 147 studies (my study and 38 other outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.1%, 10.5%, 35.6, and 23.1, respectively. I am much lower across the board. VL’s projected average annual P/E of 33.0 is higher than MS (29.4) and much higher than mine (20.0).

MS high / low EPS are $2.57 / $1.52 versus my $2.13 / $1.59 (per share). My high EPS is less due to a lower forecast growth rate. VL’s high EPS is less than both at $2.00.

MS LSPF of $35.70 implies a Forecast Low P/E of 23.5: greater than the above-stated 23.1. MS LSPF is 1.7% greater than the default $1.52/share * 23.1 = $35.11, which results in more aggressive zoning. MS LSPF is also 15.2% greater than mine.

With regard to valuation, PEG is 1.7 and 4.3 (low growth rate) per M* and my projected P/E, respectively: overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is slightly low at 0.86.

MOS is robust because my inputs are near or below respective analyst/historical ranges and MS averages. This is supported by an MS TAR 12.5% per year greater than my 2.1%.

I can entertain the possibility that my study is unreasonably conservative. My forecast growth rates are low and my forecast future P/E is exceedingly low. While the market places more of a premium on this stock over time, it’s almost like I refuse to move it into the 10-year range. For other context, M* and CFRA currently rate the stock with 4 and 5 stars, respectively. For VL, it’s “above average” with regard to long-term capital appreciation. The stock is now trading at a price first seen in ’23 but my study wouldn’t even consider touching it.

Per U/D, CPRT is a BUY under $32.50/share. Given forecast high price of $49, the BI TAR criterion [double in five years] is met at $24.50 (no dividend).

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FIVE Stock Study (10-13-25)

I recently did a stock study on Five Below, Inc. (FIVE) $138.49. Previous studies are here, here, and here.

M* writes:

     > Five Below Inc is a specialty value retailer offering merchandise targeted
     > at the tween and teen demographic. The Company’s edited assortment of
     > products includes select brands and licensed merchandise.

Over the past decade, this medium-size company has grown sales and earnings at annualized rates of 19.2% and 19.6%, respectively. Lines are mostly up, straight, and parallel except for EPS dips in ’21, ’23, and ’25 [FY ends Jan 31; references to year at BI and Value Line (VL) incremented to align]. Five- (10-) year EPS R^2 is 0.46 (0.86) and VL gives an Earnings Predictability score of 60.

Over the past decade, PTPM leads peer/industry averages while ranging from 7.8% in ’21 to 12.9% in ’22 with a last-5-year mean of 10.4%. ROE leads peer/industry averages despite falling from 28.7% (’16) to 15.7% (’25) with a last-5-year mean of 25.0%. Debt-to-Capital is less than peer/industry averages with a last-5-year mean of 53.3% (no long-term debt per VL).

Quick Ratio is 0.73 and Interest Coverage is N/A (consistent with no long-term debt) per M* who gives a Financial Health grade of C (per BI website) and assigns no Economic Moat. VL grades the company B++ for Financial Strength.

With regard to sales growth:

• YF projects YOY 16.2% and 9.8% for ’26 and ’27, respectively (based on 22 analysts).
• Zacks projects YOY 15.8% and 9.7% for ’26 and ’27, respectively (7 analysts).
• VL projects 10.9% annualized growth from ’25-’30.
• CFRA projects 15.6% YOY and 12.9% per year for ’26 and ’25-’27, respectively.
• M* provides 2-year annualized ACE of 12.6%.

My 9.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 7.0% and 9.4% per year for ’25-’27 and ’25-’28, respectively (based on 25 analysts).
• Nasdaq.com projects 8.6% YOY and 10.1% per year for ’27 and ’26-’28 (8, 8, and 4 analysts for ’26, ’27, and ’28).
• Seeking Alpha projects 4-year annualized growth of 9.0%.
• Finviz projects 5-year annualized growth of 8.7% (3).
• LSEG projects LTG of 1.9%.
• SERR projects 4-year annualized growth of 1.9% (1; I remain on alert to determine whether this is LSEG duplicate).
• YF projects YOY 1.4% and 10.0% for ’26 and ’27, respectively (22).
• Zacks projects YOY 0.4% contraction and 8.6% growth for ’26 and ’27 (8) and 5-year growth of 13.6%/year.
• VL projects 6.3% annualized growth from ’25-’30.
• CFRA projects growth of 0.4% YOY and 5.1% per year for ’26 and ’25-’27, respectively.

My 2.0% forecast is below the long-term-estimate range (mean of six is 6.9%, but in case of duplicate mean of five is 8.3%). I will use ’25 EPS of $4.60/share as the initial value rather than 2026 Q2 $4.94 (annualized).

My Forecast High P/E is 39.0. Over the past 10 years, high P/E increases from 39.5 (’16) to 46.1 (’25) with a last-5-year mean of 44.2 (excluding 89.8 in ’21) and last-5-year-mean average P/E of 33.7. I am below the range.

My Forecast Low P/E is 20.0. Over the past 10 years, low P/E decreases from 25.7 (’16) to 14.1 (’25) with a last-5-year-mean of 23.3. I am forecasting toward bottom of the range (only ’25 is less).

My Low Stock Price Forecast (LSPF) of $92.00 is default based on initial value from above. This is 33.6% less than the previous close but 75.6% greater than the 52-week low.

These inputs land FIVE in the HOLD zone with a U/D ratio of 1.3. Total Annualized Return (TAR) is 7.4%.

PAR (using Forecast Average—not High—P/E) of 1.6% is less than the current risk-free rate (T-bills). If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead (still less than I seek for a medium-size company).

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 42 studies (my study and 7 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.5%, 8.3%, 30.0, and 21.1, respectively. I am much higher on Forecast High P/E but lower on the others. VL’s projected average annual P/E of 30.0 is higher than MS (25.6) and mine (29.5).

MS high / low EPS are $7.29 / $4.77 versus my $5.08 / $4.60 (per share). My high EPS is lower due to a lower forecast growth rate. VL’s high EPS is in the middle at $6.25.

MS LSPF of $87.70 implies a Forecast Low P/E of 18.4: less than the above-stated 21.1. MS LSPF is 12.9% less than the default $4.77/share * 21.1 = $100.65, which results in more conservative zoning. MS LSPF is also 4.7% less than mine.

With regard to valuation, PEG is 2.0 and 13.7 (low growth rate) per Zacks and my projected P/E, respectively: both overvalued (M* has 1.2: fairly valued). Relative Value [(current P/E) / 5-year-mean average P/E] is slightly low at 0.83.

MOS is moderate because my inputs are near or below respective analyst/historical ranges and MS averages with one glaring exception. This is supported by an MS TAR 1.8% per year greater than my 9.2%.

The glaring exception is MS Forecast High P/E. Eleven studies (almost 25% of the total) use numbers in the 20s with four being 22.5 – 25.0. With the lowest value in 10 years being 39.5 and a last-10-year mean Forecast LOW P/E of 24.0, I think these MS numbers are unreasonably low.

Per U/D, FIVE is a BUY under $118/share. Given forecast high price ~$198, the BI TAR criterion [double in five years] is met ~$99 (no dividend).

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BFAM Stock Study (10-11-25)

I recently did a stock study on Bright Horizons Family Solutions (BFAM) with a closing price of $97.58.

M* writes:

     > Bright Horizons Family Solutions Inc provider of [sic] early education and
     > child care, family care solutions, and workforce education services that help
     > working families and client employees personally and professionally. It
     > provides services under multi-year contracts with employers that offer
     > early education and child care, back-up care, and educational advisory
     > services as part of their employee benefits package. The company has three
     > business segments; full-service center-based child care, backup care, and
     > educational advisory services. The majority of the revenue is generated
     > by full-service center-based child care, which includes traditional center-
     > based child care and early education services. Other services provided
     > by the company include in-home child and elder care, and Others.

Over the past 10 years, this medium-size company has grown sales and earnings at annualized rates of 5.4% and -2.8%, respectively. Lines are up, mostly straight, and parallel since ’20 but a huge COVID-related decline makes for the negative long-term growth rate [I actually don’t think it’s negative because $1.50/share * (1.0536 ^ 9) = $2.40/share from ’15 to ’24 corresponding to a +5.4% annualized growth rate]. 2020 aside, only ’23 shows [EPS] decline. Five- (10-) year EPS R^2 is 0.82 (0.02) and Value Line (VL) gives an Earnings Predictability score of 55.

Over the past decade, PTPM trails peer and industry averages while decreasing from 9.6% (’15) to 7.4% (’24) with a last-5-year mean of 4.8%. ROE leads peer and industry averages despite falling from 12.6% (’15) to 9.9% (’24) with a last-5-year mean of 6.4%. Debt-to-Capital is less than peer and industry averages while ranging from 56.3% (’15) to 65.1% (’19) with a last-5-year mean of 60.5%.

Quick Ratio is 0.45 and Interest Coverage is 6.5 per M* who gives a Financial Health grade of B (per BI website). and assigns a “Narrow” (quantitative) Economic Moat. VL grades the company B+ for Financial Strength.

With regard to sales growth:

• YF projects YOY 8.3% and 7.0% for ’25 and ’26, respectively (based on 7 analysts).
• Zacks projects YOY 8.3% and 7.2% for ’25 and ’26, respectively (2 analysts).
• VL projects 6.9% annualized growth from ’24-’29.
• CFRA gives ACE of 8.3% YOY and 7.6% per year for ’25 and ’24-’26, respectively (7).
• M* provides 2-year annualized ACE of 7.5%.

My 6.0% forecast is below the range.

With regard to EPS growth:

• MarketWatch projects 17.2% and 16.0% per year for ’24-’26 and ’24-’27, respectively (based on 9 analysts).
• Nasdaq.com projects 17.1% YOY and 16.0% per year for ’26 and ’25-’27 (3 analysts each for ’25, ’26, and ’27).
• Finviz projects 5-year annualized growth of 17.5% (2).
• LSEG projects LTG of 17.8%.
• SERR [cites Refinitiv] projects 4-year annualized growth of 17.8% (1).
• YF projects YOY 22.5% and 15.3% for ’25 and ’26, respectively (8).
• Zacks projects YOY 23.3% and 15.7% for ’25 and ’26, respectively (3).
• VL projects 13.7% annualized growth from ’24-’29.
• CFRA provides ACE of 77.1% YOY and 43.2% per year for ’25 and ’24-’26, respectively (8).*

My 12.0% forecast is below the long-term-estimate range (mean of four: 16.7%). I will use ’24 EPS of $2.40/share as the initial value rather than 2025 Q2 $3.05 (annualized).

My Forecast High P/E is 36.0. Over the past 10 years, high P/E increases from 46.1 (’15) to 59.1 (’24) with a last-5-year mean of 99.3 (excluding 394 in ’20) and last-5-year-mean average P/E of 77.8 (also excluding 143 low P/E in ’20). I am below the range.

My Forecast Low P/E is 32.0. Over the past 10 years, low P/E increases from 29.2 (’15) to 38.2 (’24) with a last-5-year-mean of 56.4. I am forecasting toward bottom of the range [only ’15 and ’17 (25.1) are less].

My Low Stock Price Forecast of $76.80 is default based on initial value from above. This is 21.3% less than the previous close and 19.6% less than the 52-week low.

These inputs land BFAM in the HOLD zone with a U/D ratio of 2.6. Total Annualized Return (TAR) is 9.3%.

PAR (using Forecast Average—not High—P/E) of 8.1% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on TAR instead.

To assess MOS, I usually compare my inputs with those of Member Sentiment (MS) but mine is the only study showing up on the BI website.

With regard to VL, I am more conservative. VL projects a future average annual P/E of 32.0 versus my 34.0 and high EPS of $6.60/share versus my $4.23. This contributes to a forecast high price of $255/share versus ~$152 for me.

With regard to valuation, PEG is 3.7 and 2.4 per M* and my projected P/E, respectively: both overvalued. Relative Value [(current P/E) / 5-year-mean average P/E] is fire-sale low at 0.32 [but suspect because I can’t completely rationalize the seemingly inflated values after ’20 that may be slowly coming back to earth].

MOS is at least moderate in the current study because my inputs are near or less than respective analyst/historical ranges. Without MS weighing in, I am reticent to pronounce this “robust.”

I can’t overlook an argument to say visual inspection fails for this company. We allegedly have a negative 10-year EPS growth rate and even though I think that should be positive, only since ’24 has ’15 been exceeded. That’s a long period of apparent stagnation (despite YOY growth in most instances).

Also on the questionable side is financial strength: debt-to-capital >> 33%, Quick Ratio < 1.0, and so-so Interest Coverage.

Per U/D, BFAM is a BUY under $95/share. Given forecast high price of $152.30, the BI TAR criterion [double in five years] is met ~$76 (no dividend).

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* — I can’t explain CFRA’s apparent EPS disconnect in 2025 and beyond.

MRK Stock Study (9-22-25)

I recently did a stock study on Merck & Co., Inc. (MRK) with a closing price of $81.51. The previous study is here.

M* writes:

     > Merck makes pharmaceutical products to treat several conditions in a number
     > of therapeutic areas, including cardiometabolic disease, cancer, and
     > infections. Within cancer, the firm’s immuno-oncology platform, led by
     > Keytruda, is a major contributor to overall sales. The company also has a
     > substantial vaccine business aimed at preventing pediatric diseases, as
     > well as Gardasil for human papillomavirus. Additionally, Merck sells animal
     > health-related drugs. From a geographical perspective, 47% of the company’s
     > sales are generated from US human health (pharmaceuticals and vaccines).

Over the past 10 years, the mega-size ( > $50B annual revenue) company has grown sales and earnings at annualized rates of 6.0% and 5.2%, respectively. Lines are mostly up and straight except for YOY EPS declines in ’16, ’17, ’20, and ’23 (large). Ten- (Five-) year EPS R^2 is only 0.02 (0.03) [both jump to 0.79 with ’23 excluded], and Value Line (VL) gives an Earnings Predictability score of 40.

Over the past decade, PTPM trails peer and industry averages despite increasing from 13.7% (’15) to 31.1% (’24) with a last-5-year mean of 21.7%. ROE also trails peer and industry averages despite increasing from 9.5% (’15) to 38.3% (’24) with a last-5-year mean of 26.0%. Debt-to-Capital is less than peer and industry averages despite increasing from 37.2% (’15) to 44.5% (’24) with a last-5-year mean of 47.0%.

Quick Ratio is 0.8 and Interest Coverage is 16 per M* who assigns a “Wide” Economic Moat and “Standard” Capital Allocation. VL gives an A rating for Financial Strength.

With regard to sales growth:

• YF projects YOY 0.9% and 4.9% for ’25 and ’26, respectively (based on 24 analysts).
• Zacks projects YOY 1.2% and 5.2% for ’25 and ’26, respectively (7 analysts).
• VL projects 4.8% annualized growth from ’24-’29.
• CFRA projects 1.6% YOY and 3.7% per year for ’25 and ’24-’26, respectively.
• M* projects 3.4% for the next two years and mid- to high-single digits [percent] from ’26-’28 in its analyst note.

My 2.0% forecast is bottom of the range.

With regard to EPS growth:

• MarketWatch projects 13.1% and 12.6% per year for ’24-’26 and ’24-’27, respectively (based on 27 analysts).
• Nasdaq.com projects 8.4% and 7.7% per year for ’25-’27 and ’25-’28 ( 9 / 6 / 3 analysts for ’25 / ’27 / ’28 ).
• Seeking Alpha projects 4-year annualized growth of 9.5%.
• Argus projects 5-year annualized growth of 9.0%.
• FINVIZ projects 5-year annualized growth of 11.1% per year (5).
• LSEG gives a “LTG forecast” of 12.3%.*
• YF projects YOY 7.7% and 8.9% for ’25 and ’26, respectively (23).
• Zacks projects YOY 16.7% and 7.4% for ’25 and ’26, respectively (10), along with 5-year annualized growth of 10.9%.
• VL projects 8.9% annualized growth from ’24-’29.
• CFRA projects 17.1% YOY and 13.5% per year for ’25 and ’24-’26, respectively, and a 3-year CAGR of 4.0%.
• M* projects long-term annualized growth of 11.4%.

My 8.0% forecast is just below the range of seven long-term estimates (mean 10.4%). Initial value is 2025 Q2 EPS of $6.49/share rather than ’24 EPS of $6.74.

My Forecast High P/E is 18.0. Over the past decade, high P/E falls from 38.9 in ’15 to 20.0 in ’24 with a last-5-year mean of 22.5 (excluding 855 in ’24) and a last-5-year-mean average P/E of 19.2. I am below the range.

My Forecast Low P/E is 10.0. Over the past decade, low P/E falls from 27.9 in ’15 to 14.0 in ’24 with a last-5-year mean of 15.8 (excluding 688 in ’23). I am forecasting below the range.

My Low Stock Price Forecast (LSPF) is the default value of $64.90. This is 20.4% less than previous closing price and 11.5% less than the 52-week low.

Over the past decade, Payout Ratio (PR) declines from 116% in ’15 to 46.3% in ’24 with a last-5-year mean of 59.7% (excluding 2114% in ’23). I am forecasting below the entire range at 40.0%.

These inputs land MRK in the BUY zone with an U/D ratio of 5.4. The Total Annualized Return (TAR) is 18.3%.

PAR (using Forecast Average—not High—P/E) of 13.2% is solid for a mega-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on the total annualized return (TAR) of 18.3% instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 150 studies (my study and 23 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 4.6%, 9.8%, 18.4, 12.0, and 40.0%, respectively. I am lower across the board. VL’s projected average annual P/E of 13.0 is less than MS (15.2) and less than mine (14.0).

MS high / low EPS are $10.74 / $6.52 versus my $9.54 / $6.49 (per share). My high EPS is less due to a lower growth rate. VL’s $11.70 [high EPS] soars above both.

MS LSPF of $69.10 implies Forecast Low P/E of 10.6: less than the above-stated 12.0. MS LSPF is 11.7% less than the default $6.52/share * 12.0 = $78.24 resulting in more conservative zoning. MS LSPF is still 6.5% greater than mine.

With regard to valuation, PEG is 1.5 and 0.84 per my projected P/E and Zacks, respectively: slightly undervalued. Relative Value [(current P/E) / 5-year-mean average P/E] is cheap at 0.66.

MOS is robust because my inputs are near or below respective analyst/historical ranges and MS averages. This is further corroberated by an MS TAR 16.0% per year greater than my 18.3%.

Per U/D, MRK is a BUY under $91.60/share. Given a forecast high of $171.60, a 171.6 * ((1 – ((15.0 – 2.2) / 100)) ^ 5)
~ $86.50/share target price meets the BI TAR criterion.

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” at upper right of screen).

* — Google AI reports: “while there is no fixed period for the ‘long-term growth’ (LTG) forecast
       on a London Stock Exchange Group (LSEG) detailed stock report, it typically reflects an average
       estimate over a three- to five-year time frame. This forecast horizon can vary depending on the
       analyst or research firm providing the data.”

FTNT Stock Study (10-10-25)

I recently did a stock study on Fortinet, Inc. (FTNT) with a closing price of $87.19. Previous studies are here and here.

Value Line writes:

     > Fortinet, Inc. provides cyber security solutions to businesses
     > and government agencies. Its flagship solution, FortiGate,
     > includes integrated security and networking functions to protect
     > data, applications, users from network- and content-level
     > security threats across firewall, software defined networking
     > (SD-WAN), Wifi and switch (LAN Edge) and secure access edge
     > (SASE). It sells products and services to distributors.

Since 2018 (previous years excluded due to small EPS mathematically distorting growth rate), this medium-size company has grown sales and earnings at annualized rates of 23.5% and 36.2%, respectively. Lines are up, straight, and parallel except for an EPS dip in ’19. Value Line (VL) gives an Earnings Predictability score of 95.

Since 2018, PTPM leads peers and trails the industry while increasing from 13.9% to 34.6% (’24) with a last-5-year mean of 24.2%. Stock repurchases really take off since ’20 thereby driving ROE negative in ’22 and over 1000% in ’23. Repurchases raise Debt-to-Capital > 100% in ’22 and ’23 before returning to 40.0% in ’24 as shareholders’ deficit reverses to equity.

Quick Ratio is 1.21 and Interest Coverage is 119 per M* who gives a “Standard” rating for Capital Allocation, a Financial Health grade of B (per BI website). and assigns a “Wide” Economic Moat. VL grades the company B++ for Financial Strength.

With regard to sales growth:

• YF projects YOY 11.4% and 11.7% for ’25 and ’26, respectively (based on 42 analysts).
• Zacks projects YOY 13.3% and 11.0% for ’25 and ’26, respectively (15 analysts).
• VL projects 12.5% annualized growth from ’24-’29.
• CFRA projects 13.7% YOY and 12.8% per year for ’25 and ’24-’26, respectively.
• M* provides 2-year annualized ACE of 12.7% and projects 14.0% per year for the next five years in its analyst note.

My 11.0% forecast is at bottom of the range.

With regard to EPS growth:

• MarketWatch projects 11.0% and 11.8% per year for ’24-’26 and ’24-’27, respectively (based on 45 analysts).
• Nasdaq.com projects 10.0% YOY and 11.1% per year for ’25 and ’24-’26 (18, 18, and 4 analysts for ’25, ’26, and ’27).
• Seeking Alpha projects 4-year annualized growth of 13.6%.
• Finviz projects 5-year annualized growth of 8.9% (12).
• LSEG projects LTG of 10.0%.
• SERR [debut coverage: TBD whether novel or duplicate (LSEG) metric] projects 4-year annualized growth of 10.0% (1).
• YF projects YOY 6.4% and 10.7% for ’25 and ’26, respectively (43).
• Zacks projects YOY 6.3% and 10.3% for ’25 and ’26, respectively (19), along with 5-year annualized growth of 12.0%.
• VL projects 7.5% annualized growth from ’24-’29.
• CFRA projects 7.6% YOY and 9.3% per year for ’25 and ’24-’26, respectively, along with 3-year CAGR of 11.0%.
• M* projects long-term annualized growth of 14.8%.

My 7.0% forecast is below the long-term-estimate range (mean of seven: 11.0%). I will use ’24 EPS of $2.26/share as the initial value rather than 2025 Q2 $2.51 (annualized).

My Forecast High P/E is 42.0. Since 2018, high P/E ranges from 44.5 in ’24 to 102 in ’21 with a last-5-year mean of 55.3 (excluding ’21) and last-5-year-mean average P/E of 43.3. I am below the range.

My Forecast Low P/E is 24.0. Since 2018, low P/E ranges from 22.8 in ’18 to 40.2 in ’22 with a last-5-year-mean of 31.3. I am forecasting toward bottom of the range (only ’18 is less).

My Low Stock Price Forecast (LSPF) is $60.00 (arbitrary). Default ($54.20) based on initial value above seems unreasonably low at 37.1% less than the previous close and 22.7% less than the 52-week low. This is 30.4% and 14.4% less, respectively.

These inputs land FTNT in the HOLD zone with a U/D ratio of 1.9. Total Annualized Return (TAR) is 9.1%.

PAR (using Forecast Average—not High—P/E) of 3.9% is much less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on the 9.1% total annualized return (TAR) instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 247 studies in the past 90 days (my study along with 91 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 12.6%, 12.1%, 43.7, and 28.8, respectively. I am lower across the board. VL projects a future average annual P/E of 40.0 that is greater than MS (36.3) and greater than mine (33.0).

MS high / low EPS are $4.36 / $2.31 versus my $3.17 / $2.26 (per share). My high EPS is less due to a lower growth rate. VL’s high EPS of $3.25 is just above mine.

MS Low Stock Price Forecast (LSPF) of $63.00 implies a Forecast Low P/E of 27.3: less than the above-stated 28.8. MS LSPF is 5.3% less than the default $2.31/share * 28.8 = $66.53 resulting in more conservative zoning. MS LSPF is 5.0% greater than mine, however.

With regard to valuation, PEG is 2.9 and 4.6 per Zacks and my projected P/E, respectively. This is extremely overvalued while M* shows undervalued at 0.88. Relative Value [(current P/E) / 5-year-mean average P/E] is slightly low at 0.79.

MOS is robust in the current study because my inputs are less than MS and near or less than respective analyst/historical ranges. MS TAR of 17.0% is 7.9% per year greater than mine.

Per U/D, FTNT is a BUY under $78/share. Given forecast high price ~$133, the BI TAR criterion [double in five years] is met under $66.50.

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” at upper right of screen).

BF.B Stock Study (10-9-25)

I recently did a stock study on Brown-Forman Corp (BF.B) with a closing price of $27.81. The previous study is here.

M* writes:

     > Brown-Forman is a US-based manufacturer of premium distilled
     > spirits that generates 71% of revenues in the whiskey
     > category, under well-known Tennessee whiskey brand Jack Daniel’s
     > and bourbon brands Woodford Reserve and Old Forester. It also
     > manufactures and distributes tequila, vodka, rum, gin, and premium
     > wines. The company generates 45% of sales from its home market,
     > while the bulk of international revenues come from Europe,
     > Australia, and Latin America. The Brown family controls over 50%
     > of the economic interests and a 67% voting power of the company.

Over the past nine years (FY ends Apr 30; references to year at BI and Value Line incremented to align), this medium-size company has grown sales and EPS at annualized rates of 4.0% and 3.7%, respectively (2016 excluded due to one-time sale of Southern Comfort and Tuaca brands that resulted in EPS up 63.3% YOY). Lines are somewhat up and parallel with sales dips in ’24 and ’25 and EPS dips in ’20, ’22, ’23, and ’25. Ten- (five-) year EPS R^2 is 0.58 (0.07) and Value Line (VL) gives an Earnings Predictability score of 85.

Over the past nine years, PTPM trails peer and industry averages while declining from 31.2% to 27.2% (’25) with a last-5-year mean of 28.4%. ROE also lags peer and industry averages while falling from 55.5% (’17) to 22.7% (’25) with a last-5-year mean of 29.8%. Debt-to-Capital is less than peer and industry averages while declining from 61.1% (’17) to 40.6% (’25) with a last-5-year mean of 45.8%.

Quick Ratio is 0.88 and Interest Coverage is 10.1 (21.1) per M* (VL). M* rates the company “Exemplary” for Capital Allocation, assigns a “Wide” Economic Moat, and gives a Financial Health grade of B (per BI website). VL grades the company B++ for Financial Strength.

With regard to sales growth:

• YF projects YOY 3.4% contraction and 2.0% growth for ’26 and ’27, respectively (based on 17 analysts).
• Zacks projects YOY 3.4% contraction and 1.7% growth for ’26 and ’27, respectively (4 analysts).
• VL projects 4.2% annualized growth from ’25-’30.
• CFRA projects contraction of 2.8% YOY and 0.8% per year for ’26 and ’25-’27, respectively.
• M* provides 2-year ACE of 1.3%/year contraction and projects 3.4%/year growth for next decade in its analyst note.

I am being [very] conservative and forecasting zero growth.

With regard to EPS growth:

• MarketWatch projects 2.2% contraction and 0.9% growth per year for ’25-’27 and ’25-’28 (based on 22 analysts).
• Nasdaq.com projects growth of 4.7% and 3.5%/year for ’26-’28 and ’26-’29 [6, 3, and 1 analyst(s) for ’26, ’28, and ’29].
• Seeking Alpha projects 4-year annualized growth of 1.0%.
• Finviz projects 5-year annualized growth of 0.6%.
• YF projects YOY 10.4% contraction for ’26 and 5.0% growth for ’27 (17).
• Zacks projects YOY 9.8% contraction for ’26 and 3.6% growth for ’27 (4).
• VL projects 9.1% annualized growth from ’25-’30.
• CFRA projects contraction of 10.3% YOY for ’26 and 3.9% per year for ’25-’27.
• M* projects long-term annualized growth of 4.3%.

My 1.0% forecast is near bottom of the long-term-estimate range (mean of four: 3.8%). I will use 2026 Q1 EPS of $1.79/share (annualized) as the initial value rather than ’25 EPS of $1.84.

My Forecast High P/E is 27.0. Over the past nine years, high P/E ranges from 27.1 in ’25 to 47.9 in ’23 with a last-5-year mean of 39.9 and a last-5-year-mean average P/E of 34.3. I am below the range.

My Forecast Low P/E is 12.0. Over the past nine years, low P/E ranges from 16.6 in ’25 to 37.0 in ’23 with a last-5-year mean of 28.7. I am forecasting well below the range.

My Low Stock Price Forecast (LSPF) is the default $21.50 given initial value above. This is 22.7% less than the previous closing price and 15.7% less than the 52-week low.

Over the past nine years, Payout Ratio (PR) ranges from 37.5% in ’19 to 48.3% in ’23 (and ’25) with a last-5-year mean of 43.2%. I am forecasting below the range at 37.0%.

These inputs land BF.B in the BUY zone with a U/D ratio of 3.6. Total Annualized Return (TAR) is 14.1%.

PAR (using Forecast Average—not High—P/E) of 7.5% is less than I seek for a medium-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on the 14.1% total annualized return (TAR) instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 11 studies in the past 90 days (my study and 6 other outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 2.6%, 4.2%, 25.0, 16.0, and 42.8%, respectively. I am lower on all but Forecast High P/E (27.0). VL projects a future average annual P/E of 18.0 that is less than both MS (20.5) and mine (19.5).

MS high / low EPS are $2.24 / $1.79 versus my $1.88 / $1.79 (per share). My high EPS is less due to a lower growth rate. VL’s high EPS of $2.85 soars above both.

MS Low Stock Price Forecast (LSPF) of $23.30 implies a Forecast Low P/E of 13.0: less than the above-stated 16.0. MS LSPF is 18.7% less than the default $1.79/share * 16.0 = $28.64 (INVALID on today’s date) resulting in more conservative zoning. MS LSPF is 8.4% greater than mine, however.

With regard to valuation, PEG is 15.4 and 11.4 per my projected P/E and M*, respectively. I regard these as NMF due to small denominators (growth rate). Relative Value [(current P/E) / 5-year-mean average P/E] is extremely low at 0.45.

I think MOS is high because my inputs are near or below respective analyst/historical ranges. My Forecast P/Es are below historical ranges. Earnings growth has been discounted to 1%. I’ve even lowballed the PR, which M* thinks is sustainable and reasonable long-term at 52%. Comparison with MS is not robust due to the small sample size but as anecdotal reference, MS TAR of 17.9% is 3.8% per year greater than mine: consistent with a solid MOS.

Despite doing business for over 150 years, Brown-Forman is still “undiscovered country” for the BI community although its brands probably are not. It’s a slow grower and that may be significant. However, it seems built to last with solid financial strength. Unless one thinks alcohol will be phased out in coming years, it may be worth a look. CFRA describes it as a high-quality stock with gross margins near 60% and Dividend Aristocrat status.

Per U/D, BF.B is a BUY under $28.80/share. Given a forecast high ~$51, the BI TAR criterion [doubling in five years] is met
~ 50.8 * ((1 – ((15.0 – 1.4) / 100)) ^ 5) = $24.50/share.

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” at upper right of screen).

LRN Stock Study (10-8-25)

I recently did a stock study on Stride Inc. (LRN) with a closing price of $140.00. The previous study is here.

M* writes:

     > Stride Inc is an American online educational company. It
     > offers alternative programs to traditional on-campus schooling.
     > It also operates state-funded virtual charter schools around the
     > United States. The educational programs for K-12 students are
     > usually monitored by parents and provide virtual classroom
     > environments where teachers meet with students online, by phone,
     > or in-person. The company’s contractual agreements with various
     > school districts to offer its curriculum programs provide a
     > majority of the company’s revenue. The company lines of business
     > are Managed Public School Programs, Institutional, and Private
     > Pay Schools and Other.

Since 2018 (2016-7 excluded due to small base distorting EPS growth rates), this medium-size company has grown sales and EPS at annualized rates of 15.4% and 40.5%, respectively. Lines are up, straight, and parallel except for a sales+EPS dip in ’20 (probably due to COVID-19). Value Line (VL) gives an Earnings Predictability score of 60.

Since 2018 (FY ends Jun 30), PTPM trails peer and industry averages while increasing from 2.9% to 15.9% (’25) with a last-5-year mean of 10.7%. ROE leads peer and industry averages while increasing from 4.5% (’18) to 18.3% (’25) with a last-5-year mean of 14.7%. Debt-to-Capital is lower than peer and industry averages despite increasing from 4.2% (’18) to 27.1% (’25) with a last-5-year mean of 34.5%.

Quick Ratio is 5.1 and Interest Coverage is 37.5 per M* who assigns a “Narrow” [quantitative] Economic Moat and gives a B grade for Financial Health (per BI website). VL gives a Financial Strength grade of B++.

With regard to sales growth:

• YF projects YOY 10.9% and 7.8% for ’26 and ’27, respectively (based on 5 analysts).
• Zacks projects YOY 10.7% and 7.5% for ’26 and ’27, respectively (3 analysts).
• VL projects 9.8% annualized growth from ’25-’29.
• CFRA gives ACE of 10.9% YOY and 9.3% per year for ’26 and ’25-’27, respectively (5).
• M* gives a 2-year ACE of 10.1% per year.

I am forecasting conservatively below the range at 7.0%.

With regard to EPS growth:

• MarketWatch projects 14.9% and 13.3% per year for ’25-’27 and ’25-’28, respectively (based on 7 analysts).
• Nasdaq.com projects 10.2% YOY and 11.4% per year for ’27 and ’26-’28 [4 / 3 / 1 analyst(s) for ’26 / ’27 / ’28].
• Finviz gives ACE 5-year annualized growth of 19.0% per year (4).
• LSEG gives a “LTG forecast” of 20.0%.*
• YF projects YOY 12.0% and 10.5% for ’26 and ’27, respectively (4).
• Zacks projects YOY 8.8% and 10.2% for ’26 and ’27, respectively (3), and 5-year annualized growth of 20.0%.
• VL projects 11.1% annualized growth from ’25-’29.
• CFRA gives ACE of 52.4% YOY and 29.8% per year for ’26 and ’25-’27 [4; projected ’26 acceleration quite steep!].
• M* projects long-term annualized growth of 20.0%.

My 11.0% forecast is below the long-term-estimate range (mean of five: 18.0% per year). Initial value is ’25 EPS of $5.95/share.

My Forecast High P/E is 15.0. Since 2018, high P/E ranges from 15.6 in ’24 to 52.6 in ’20 with a last-5-year mean of 21.3 and a last-5-year-mean average P/E of 15.7. I am below the range.

My Forecast Low P/E is 10.0. Since 2018, low P/E declines from 18.7 to 10.6 (’25) with a last-5-year mean of 10.1. I am forecasting near bottom of the range (only 7.6 in ’24 is lower).

My Low Stock Price Forecast (LSPF) of $63.30 is the 52-week low: 54.8% less than the previous closing price. Default based on initial value from above is $59.50, which is 57.5% less than previous close.

These inputs land LRN in the HOLD zone with a U/D ratio of 0.1. Total Annualized Return (TAR) is 1.5%.

PAR (using Forecast Average—not High—P/E) is prohibitive for any size company at negative 2.2%. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on the total annualized return (TAR) of 1.5% but even that is well below the risk-free rate (T-bills).

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 74 studies (my study and 26 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E are 10.0%, 15.9%, 21.3, and 12.0, respectively. I am lower across the board. VL’s projected average annual P/E of 18.0 is greater than MS (16.7) and much greater than mine (12.5).

MS high / low EPS are $12.74 / $6.02 versus my $10.03 / $5.95 (per share). My high EPS is less due to a lower growth rate. Value Line comes in the middle at $11.10.

MS Low Stock Price Forecast (LSPF) of $81.70 implies Forecast Low P/E of 13.6: greater than the above-stated 12.0. MS LSPF is 13.1% greater than the default $6.02/share * 12.0 = $72.24 resulting in more aggressive zoning. MS LSPF is also 29.1% greater than mine.

With regard to valuation, PEG is 0.8 and 1.9 per Zacks and my projected P/E, respectively: fairly valued. M* gives 0.4 with a current P/E of 23.5 thereby implying a growth rate of 23.5 / 0.4 ~ 58.7% (possibly in the ballpark of CFRA’s ’26 ACE). Relative Value [(current P/E) / 5-year-mean average P/E] is overcooked at 1.48.

MOS is strong in the current study because my inputs are below MS and near or below respective analyst/historical ranges. Also consistent is a MS TAR that is 12.2% per year greater than my 1.5%.

This appears to be a high-quality company whose stock heeds the fundamentals. I find these issues very tough to buy. Were I allocating a portion of my portfolio to a momentum strategy, things might be different.

U/D has LRN a BUY under $85/share. Given a forecast high price just over $150, the stock needs to approach $75 (no dividend) in order to meet the BI TAR criterion (double in five years).

A 90-day free trial to BetterInvesting® may be secured here (also see link under “Pages” section at top right of this page).

* — Google AI reports: “while there is no fixed period for the ‘long-term growth’ (LTG)
       forecast on a London Stock Exchange Group (LSEG) detailed stock report, it typically
       reflects an average estimate over a three- to five-year time frame. This forecast
       horizon can vary depending on the analyst or research firm providing the data.”

CNC Stock Study (9-18-25)

I recently did a stock study on Centene Corp. (CNC) with a closing price of $32.02. Previous studies are here and here.

M* writes:

     > Centene is a managed-care organization focused on government-
     > sponsored healthcare plans, including Medicaid, Medicare, and
     > the individual exchanges. Centene served 22 million medical
     > members as of Dec 2024, mostly in Medicaid (about 60% of
     > membership), the individual exchanges (about 20%), and
     > Medicare (about 5%). The company also has a military
     > contract and provides Medicare Part D pharmaceutical plans.

Over the past 10 years, the mega-size ( > $50B annual revenue) company has grown sales and earnings at annualized rates of 23.7% and 13.0%, respectively. Lines are somewhat up, straight, and parallel except for YOY EPS declines in ’18, ’20, ’21, and ’22. Ten- (Five-) year EPS R^2 is 0.65 (0.51), and Value Line gives an Earnings Predictability score of 90.

Over the past decade, PTPM trails peer and industry averages while falling from 3.1% (’15) to 2.6% (’24) with a last-5-year mean of 2.0%. ROE also trails peer and industry averages while falling from 17.0% (’15) to 11.5% (’24) with a last-5-year mean of 7.7%. Debt-to-Capital is about even with peer and industry averages while increasing from 36.1% (’15) to 42.4% (’24) with a last-5-year mean of 42.9%.

Value Line gives a B+ (was B++ one year ago) grade for Financial Strength. Quick Ratio is 1.1 and Interest Coverage is 5.0 per M* who assigns no Economic Moat (was “Narrow” one year ago), “Standard” Capital Allocation, and writes: “despite the company’s deleveraging after acquisitions in recent years, a near-term profit shock has put more pressure on CNC’s balance sheet, which has fallen back into the weak category from sound previously.”

With regard to sales growth:

• YF projects YOY 16.2% and flat for ’25 and ’26, respectively (based on 15 analysts).
• Zacks projects YOY 16.9% growth and 0.1% contraction for ’25 and ’26, respectively (8 analysts).
• Value Line projects 8.5% annualized growth from ’24-’29.
• CFRA projects growth of 8.9% YOY and 10.9% per year for ’25 and ’24-’26, respectively.
• In its analyst note, M* provides a 2-year ACE of 4.0% growth per year.

My 4.0% per year forecast is at bottom of the range.

With regard to EPS growth:

• MarketWatch projects 8.7% and 10.1% per year for ’24-’26 and ’24-’27, respectively (based on 22 analysts).
• Nasdaq.com projects 79.3% YOY and 61.2% per year for ’26 and ’25-’27 ( 9 / 9 / 5 analysts for ’25 / ’26 / ’27 ).
• Seeking Alpha projects 4-year annualized contraction of 11.9%.
• Argus projects 5-year annualized growth of 15.0%.
• YF projects YOY 77.4% contraction and 97.2% growth for ’25 and ’26, respectively (17).
• FINVIZ projects 5-year annualized contraction of 12.4% per year (8).
• Zacks projects YOY 77.1% contraction and 79.1% growth for ’25 and ’26 (9), along with 5-year growth of 15.0%/year.
• Value Line projects 7.0% annualized contraction from ’24-’29.
• CFRA projects contraction of 76.2% YOY and 15.9% per year for ’25 and ’24-’26 along with 3-year CAGR of 9.0%.
• M* projects long-term growth of [9.7% on BI website but only] 4.0% per year through ’28 in its analyst note.

I am forecasting flat long-term earnings: just below the mean (0.5%) of six long-term estimates. Initial value is ’24 EPS of $6.31/share rather than 2025 Q2 EPS of $4.04 (annualized).

My Forecast High P/E is 13.0. Over the past decade, high P/E falls from 28.7 in ’15 to 12.9 in ’24 with a last-5-year mean of 27.8 and a last-5-year-mean average P/E of 23.4. I am near bottom of the range (only ’24 is less).

My Forecast Low P/E is 5.0. Over the past decade, low P/E falls from 17.6 in ’15 to 8.7 in ’24 with a last-5-year mean of 19.1. I am forecasting below the range and current P/E of 7.9.

My Low Stock Price Forecast (LSPF) is $24.80. Default low price of $31.50 is less than 2.0% below previous closing price. I am therefore replacing the $6.31/share mentioned above with 2024 EPS of $4.95/share for my low EPS forecast. The resultant $24.80 is 22.5% less than the previous closing price and 1.2% less than the 52-week low.

These inputs land CNC in the BUY zone with a U/D ratio of 6.9. Total Annualized Return (TAR) is 20.7%.

PAR (using Forecast Average—not High—P/E) of 12.1% is pretty decent for a mega-size company. If a healthy margin of safety (MOS) anchors the study, then I can proceed based on the total annualized return (TAR) of 20.7% instead.

To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on only 20 studies (my study and 9 outliers excluded) over the past 90 days, averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, and Forecast Low P/E, are 4.7%, 6.3%, 14.9, and 7.5, respectively. I am lower across the board. Value Line’s projected average annual P/E of 10.0 is less than MS (11.2) and greater than mine (9.0).

MS high / low EPS are $7.92 / $5.25 versus my $6.31 / $4.95 (per share). My high EPS is less due to a lower growth rate (and probably low EPS being from ’24). Value Line’s $5.00 is less than both.

MS Low Stock Price Forecast (LSPF) of $26.70 implies Forecast Low P/E of 5.1: less than the above-stated 7.5. MS LSPF is 32.2% less than the default $5.25/share * 7.5 = $39.38 resulting in more conservative zoning. MS LSPF is still 7.7% greater than mine.

With regard to valuation, PEG is 1.3 per Zacks (undefined per my growth rate of zero): fairly valued. Relative Value [(current P/E) / 5-year-mean average P/E] is extremely low at 0.34.

MOS is robust because my inputs are near or below respective analyst/historical ranges and MS averages. That is further supported by an MS TAR that is 8.9% per year greater than my 20.7%.

I approach CNC with hesitation because of the current uncertainty. Corporate guidance for ’25 has been withdrawn. M* details many challenges being faced with government aims to cut Medicare funding, its low-[star ratings] quality medical insurance offerings, and loss of Narrow moat. Value Line and M* both indicate weakening financial strength. Value Line writes CNC “urgently needs to focus on restoring its earnings trajectory.” I do feel my inputs are conservative resulting a solid MOS but…

Per U/D, CNC is a BUY under $39.10/share. BI TAR criterion is met under $41/share given a forecast high price of $82 (no dividend).

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