Overview for Sector Screens
For my first official newsletter, we will be filtering & analyzing 16 different sectors ranging from AdTech to Second Hand eCommerce. It should be stated that this is only one of many ways to judge a company and isn’t intended as financial advise.
Each one of these screens will be sorted by lowest Enterprise Value (EV)/2022 Expected Gross Profit (GP) multiple as I feel that grabs the best company snapshot I’m looking for. If possible I try to compared all different types of company sizes down to ~200M market cap inside each sector.
I break each sector down in five quick sections:
Spreadsheet Data - Full data used with avg, median, min & max roundup of each sector. Sector Scatter Plot of NNTM (2021-2022) Revenue CAGR vs EV/2022e GP Multiple included here as well with trendline.
Sector Stats - Looks at avg/median gross margin, NTM rev growth %, EV/2022e GP multiple. For these stats I’ll be using averages unless the group is larger than 10 companies then I’ll use median.
Sector Highlights - I highlight the companies with strongest gross margins, strongest growth, smallest gross margins & slowest growth.
Scatter Plot Trendline Error %: - Using the sector scatter plot generated trendline equation I look at the biggest discrepancies between their actual EV/2022e GP multiples vs their expected ones. Will be tracking the high and low extreme companies moving forward to see how this criteria works over time.
My Take - Quick one or two sentence take.
I outline how this data is taken in my first introductory newsletter:
Data comes from first Yahoo Finance average analyst estimate (preferably 5+ analysts, I’m also a big median over average guy but sadly I’m just a retail investor so this is what I have), if not enough data there I check Seeking Alpha (and to verify), Koyfin, then after use company guidance.
Market Cap data comes from google finance function on google sheets, Enterprise Value (EV) data comes from Yahoo Finance and Seeking Alpha.
The sectors I will be looking at in this newsletter are:
AdTech
Auto/EV
Big Tech
Clean Energy (broad)
Cloud (broad)
eCommerce (broad)
eCommerce SaaS
Fintech
Food & Drink
Gaming
iGaming
Real Estate
Retail (broad)
Regional eCommerce
Second Hand eCommerce
Social Media
I’ll continue to update these sector screens on a quarterly basis and add any that intrigue me or I get a request for.
There’s two main assumptions that should absolutely be stated before we begin with each sector screen:
I’m assuming the financial information gathered is correct - Please let me know if something is off for a company I’d be happy to look into it further and correct it.
I’m assuming with gross profit projections their gross margin won’t change - This obviously isn’t reality as margins expand/contract over time as a companies business changes/scales but this is the best I can do (as of now at least).
Gross Margins is also a metric that can be left for some company interpretation for the tech based ones.
I leave basically all of my work in here for full transparency - fully up to you to have some fun with the trendline equations and do your own projections etc. I’m doing this because I genuinely enjoy it not for gain of any kind. Hope any of this is helpful!
Sector Screens
AdTech
Companies looked at: Acuity (ATY), Magnite (MGNI), Pubmatic (PUBM), Roku (ROKU), Taboola (TBLA), The Trade Desk (TTD)
Sector Stats:
Avg Gross Margin: 66%
Avg NNTM Rev CAGR: 28%
Avg EV/2022e GP Multiple: 17x
Sector Highlights:
Strongest Margins: TBLA (84% Gross Margins)
Strongest Growth: ROKU (41% NNTM Revenue CAGR)
Smallest Margins: ROKU (45% Gross Margins)
Slowest Growth: ATY (14% NNTM Revenue CAGR)
Scatter Plot Trendline Error %:
Undervalued: TBLA (+380% Upside Correction)
Overvalued: ATY (-71% Downside Correction)
Full Data:
My Take
Biggest standouts here are TBLA on the upside potential (SPAC discount?) and ATY multiple not matching revenue growth. Leaders in group trading at premium isn’t a big surprise. Strong group with a long runway ahead.
Auto/EV
Companies looked at: Stellantis (STLA), Ford (F), GM (GM), Canoo (GOEV), Carvana (CVNA), Lion Electric (LEV), Tesla (TSLA), Proterra (PTRA), Nio (NIO), Xpeng (XPEV), Lucid Motors (CCIV/LCID), Arrival (ARVL), Fisker (FSR)
Sector Stats:
Median Gross Margin: 12%
Median NNTM Rev CAGR: 53%
Median EV/2022e GP Multiple: 40x
Sector Highlights:
Strongest Margins: GOEV (73% Gross Margins)
Strongest Growth: CCIV/LCID (582% NNTM Rev CAGR)
Smallest Margins: PTRA (4% Gross Margins)
Slowest Growth: F (10% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: STLA (+354% Upside Correction)
Overvalued: XPEV (-53% Downside Correction)
Full Data:
My Quick Take
PLEASE ESPECIALLY DON’T USE THIS INFORMATION TO MAKE INVESTMENT DECISIONS.
This is a sector that's pretty hard to judge with these parameters due to many EV players just beginning to ramp up production and therefor revenue (which makes for some outrageous rev growth %). I really wouldn’t judge much off of this data but hopefully as the quarters roll on the data becomes stronger!
Big Tech
Companies looked at: Apple (AAPL), Amazon (AMZN), Facebook (FB), Alphabet (GOOG), Microsoft (MSFT)
Sector Stats:
Avg Gross Margin: 53%
Avg NNTM Rev CAGR: 21%
Avg EV/2022e GP Multiple: 12x
Sector Highlights:
Strongest Margins: FB (81% Gross Margins)
Strongest Growth: FB (26% NNTM Rev CAGR)
Smallest Margins: AMZN (24% Gross Margins)
Slowest Growth: MSFT (14% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
For Big Tech, given the unrealistic negative slope trendline I used total data pool trendline equation for error % below:
Undervalued: FB (+115% Upside Correction)
Overvalued: MSFT (-19% Downside Correction)
Full Data:
My Quick Take
Fun scatter plot trendline that makes a ton of sense. I think most agree FB is cheap even still as it’s had a great Q2. MSFT being most “overvalued” using this criteria doesn’t surprise me. Not a huge fan although they have a piece in every market basically and most balanced rev stream of the five.
Clean Energy
Companies looked at: Bloom Energy (BE), Brookfield Renewable Partners (BEP), Canadian Solar (CSIQ), Clearway Energy (CWEN), Daqo New Energy (DQ), Enphase (ENPH), FuelCell (FCEL), FirstSolar (FSLR), Honeywell (HON), JinkoSolar (JKS), NextEra Energy (NEE), Plug Power (PLUG), Solaredge (SEDG), SunPower (SPWR), Stem (STEM)
Since STEM stretches this X-axis so far out, below is without them to get a better inside view:
Sector Stats:
Median Gross Margin: 25%
Median NNTM Rev CAGR: 27%
Median EV/2022e GP Multiple: 14x
Sector Highlights:
Strongest Margins: CWEN (69% Gross Margins)
Strongest Growth: STEM (208% NNTM Rev CAGR)
Smallest Margins: PLUG (-139% Gross Margins)
Slowest Growth: FSLR (2% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: CSIQ (+400% Upside Correction)
Overvalued: ENPH (-35% Downside Correction)
Full Data:
My Quick Take
What is quite apparent is that CSIQ, JKS & DQ all carry a China discount while none else are “undervalued” using the trendline equation. I’m sure most wouldn’t think STEM would be the closest to fair value of growth. You would think growth projections would be stronger in this group!
Cloud
Companies looked at: Akamai (AKAM), SalesForce (CRM), Crowdstrike (CRWD), Datadog (DDOG), Five9 (FIVN), Fastly (FSLY), MongoDB (MDB), Cloudflare (NET), Nice (NICE), Olo (OLO), Palantir (PLTR), Snowflake (SNOW), Twilio (TWLO), Zoom (ZM), Zscaler (ZS)
Sector Stats:
Median Gross Margin: 71%
Median NNTM Rev CAGR: 33%
Median EV/2022e GP Multiple: 34x
Sector Highlights:
Strongest Margins: MNDY (86% Gross Margins)
Strongest Growth: SNOW (74% NNTM Rev CAGR)
Smallest Margins: TWLO (52% Gross Margins)
Slowest Growth: AKAM (7% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: CRM (+165% Upside Correction)
Overvalued: NICE (-54% Downside Correction)
Full Data:
My Quick Take
CRM isn’t a surprise for me being this attractive, I’ve thought about getting a position for a while. Amused by SNOW multiple being justified in this! Extremely long runway here.
eCommerce
Companies looked at: AliBaba (BABA), Amazon (AMZN), BarkBox (BARK), Chewy (CHWY), Coupang (CPNG), Etsy (ETSY), Farfetch (FTCH), Fiverr (FVRR), JD.com (JD), Jumia (JMIA), Mercardolibre (MELI), Ozon (OZON), Pinduoduo (PDD), Poshmark (POSH), RealReal (REAL), Sea Limited (SE), Stitch Fix (SFIX), ThreadUP (TDUP), Upwork (UPWK), Wayfair (W), ContextLogic (WISH)
Sector Stats:
Median Gross Margin: 53%
Median NNTM Rev CAGR: 26%
Median EV/2022e GP Multiple: 11x
Sector Highlights:
Strongest Margins: POSH (83% Gross Margins)
Strongest Growth: SE (63% NNTM Rev CAGR)
Smallest Margins: JD (8% Gross Margins)
Slowest Growth: EBAY (8% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: WISH (+312% Upside Correction)
Overvalued: TDUP (-50% Downside Correction)
Full Data:
My Quick Take
eCommerce multiples in general trade at a discount for some reason. Didn’t think WISH would come in that high and I’ve been a fan of REAL although they have a retail side. BARK stands out the most to me personally (another SPAC discount?) and I’m not too surprised on SE even though its a top 3 position for me.
eCommerce SaaS
Companies looked at: BigCommerce (BIGC), Shopify (SHOP), Squarespace (SQSP), Wix.com (WIX)
Sector Stats:
Avg Gross Margin: 71%
Avg NNTM Rev CAGR: 30%
Avg EV/2022e GP Multiple: 26x
Sector Highlights:
Strongest Margins: SQSP (84% Gross Margins)
Strongest Growth: SHOP (42% NNTM Rev CAGR)
Smallest Margins: SHOP (53% Gross Margins)
Slowest Growth: SQSP (23% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: WIX (+46% Upside Correction)
Overvalued: BIGC (-23% Downside Correction)
Full Data:
My Quick Take
I really like this sector so I wanted to take a look at how the much smaller market share players compare to the beast that is Shopify. Monitoring for now but these all have a long runway IMO.
Fintech
Companies looked at: Affirm (AFRM), D-Local (DLO), Fiserv (FISV), Shift4 Payments (FOUR), Futu (FUTU), Global-E (GLBE), Katapult (KPLT), Lightspeed (LSPD), Marqeta (MQ), Paypal (PYPL), Paysafe (PSFE), SoFi (SOFI), Square (SQ), StoneCo (STNE), Up Fintech (TIGR), Upstart (UPST)
Sector Stats:
Median Gross Margin: 44%
Median NNTM Rev CAGR: 59%
Median EV/2022e GP Multiple: 27x
Sector Highlights:
Strongest Margins: STNE (76% Gross Margins)
Strongest Growth: FUTU (93% NNTM Rev CAGR)
Smallest Margins: TIGR (16% Gross Margins)
Slowest Growth: FISV (5% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: KPLT (+1097% Upside Correction)
Overvalued: DLO (-57% Downside Correction)
Full Data:
My Quick Take
Pretty interesting how stretched out the three recent fintech IPO’s are in MQ, GLBE & DLO. KPLT coming in with the strongest SPAC discount(?) we’ve seen by far. PSFE & FISV are misleading error %’s since the y-intercept is higher than their growth already (big reason I thought it was fair to put in the equation).
Food & Drink
Companies looked at: BurgerFi (BFI), Celsius Holdings (CELH), Chipotle (CMG), Denny’s (DENN), Domino’s Pizza (DPZ), Darden Restaurants (DRI), Jack in the Box (JACK), McDonalds (MCD), Noodles & CO (NDLS), Oatly (OTLY), Potbelly (PBPB), Restaurant Brands International (QSR), Red Robin (RRGB), Starbucks (SBUX), Shake Shack (SHAK), Texas Roadhouse (TXRH), Wendys (WEN), Wingstop (WING), Yum! Brands (YUM)
Sector Stats:
Median Gross Margin: 31%
Median NNTM Rev CAGR: 17%
Median EV/2022e GP Multiple: 14x
Sector Highlights:
Strongest Margins: QSR (57% Gross Margins)
Strongest Growth: CELH (61% NNTM Rev CAGR)
Smallest Margins: RRGB (8% Gross Margins)
Slowest Growth: QSR (3% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: BFI (+475% Upside Correction)
Overvalued: CMG (-49% Downside Correction)
Full Data:
My Quick Take
This is another sector that’s tough to judge since I’m capturing their gross margins in a year where this sector’s actual business did quite bad. Moving forward I hope this sector becomes more insightful going into 2022. Not surprised OTLY and CMG are overvalued in this (cult following) and another nice SPAC discount with BFI.
Gaming
Companies looked at: Applovin (APP), Activision Blizzard (ATVI), Electronic Arts (EA), Nintendo (NTDOY), Roblox (RBLX), Sea Limited (SE), Skillz (SKLZ), Tencent (TCEHY), Take-Two (TTWO), Unity (U)
Sector Stats:
Median Gross Margin: 67%
Median NNTM Rev CAGR: 20%
Median EV/2022e GP Multiple: 10x
Sector Highlights:
Strongest Margins: SKLZ (95% Gross Margins)
Strongest Growth: RBLX (84% NNTM Rev CAGR)
Smallest Margins: SONY (28% Gross Margins)
Slowest Growth: NTDOY (7% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: SONY (+73% Upside Correction)
Overvalued: U (-54% Downside Correction)
Full Data:
My Quick Take
I did some quick digging and this is a sector where what these companies define under gross margins is pretty different with each company (RBLX gross margins being the best example) so I’m hesitant to truly make conclusions from this dataset.
iGaming
Companies looked at: DraftKings (DKNG), Genius Sports (GENI), Golden Nugget Online Gaming (GNOG), MGM Resorts International (MGM), Penn National Gaming (PENN), Rush Street Interactive (RSI)
Sector Stats:
Avg Gross Margin: 41%
Avg NNTM Rev CAGR: 45%
Avg EV/2022e GP Multiple: 18x
Sector Highlights:
Strongest Margins: GNOG (60% Gross Margins)
Strongest Growth: DKNG (56% NNTM Rev CAGR)
Smallest Margins: GENI (28% Gross Margins)
Slowest Growth: PENN (26% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: GNOG (+149% Upside Correction)
Overvalued: GENI (-59% Downside Correction)
Full Data:
My Quick Take
Here we have an interesting dynamic to the SPAC discount narrative throughout this newsletter to this point. GNOG trading at the strongest discount whereas DKNG and GENI both are the only ones trading at a true premium.
PENN and MGM both look great but the Barstool side to PENN is my favorite.
Real Estate
Companies looked at: Compass (COMP), eXp World Holdings (EXPI), Fathom Realty (FTHM), Opendoor (OPEN), Redfin (RDFN), Zillow (Z)
Sector Stats:
Avg Gross Margin: 19%
Avg NNTM Rev CAGR: 50%
Avg EV/2022e GP Multiple: 12x
Sector Highlights:
Strongest Margins: Z (47% Gross Margins)
Strongest Growth: OPEN (81% NNTM Rev CAGR)
Smallest Margins: FTHM (6% Gross Margins)
Slowest Growth: COMP (34% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Since the trendline given from this market this is negative, I’m using full data set trendline equation for the error %. Should note that Real Estate sector trades at a discount in general as well.
Undervalued: COMP (427% Upside Correction)
Overvalued: FTHM (-12% Downside Correction)
Full Data:
My Quick Take
Another sector that trades at a serious discount (market doesn’t believe in these challengers to trinational RE?). COMP hasn’t had a great IPO performance from earlier this year even with attractive multiples.
Rare to see the market leader (Z) trade at such a strong premium, one piece of reasoning it’s a top 5 position for me.
Retail
Companies looked at: Axon (AXON), Best Buy (BBY), Costco (COST), Cricut (CRCT), Crocs (CROX), Corsair Gaming (CRSR), Camping World (CWH), CVS Pharmacy (CVS), Disney (DIS), Dicks Sporting Goods (DKS), Drive Shack (DS), Callaway Golf (ELY), Casper (CSPR), Gamestop (GME), Acushnet (GOLF), Turtle Beach (HEAR), Home Depot (HD), iRobot (IRBT), Joann (JOAN), Lovesac Co (LOVE), Lowe’s (LOW), Lululemon (LULU), Peloton (PTON), Purple (PRPL), Restoration Hardware (RH), Walgreens (WBA)
Sector Stats:
Median Gross Margin: 34%
Median NNTM Rev CAGR: 13%
Median EV/2022e GP Multiple: 5x
Sector Highlights:
Strongest Margins: AXON (61% Gross Margins)
Strongest Growth: PTON (71% NNTM Rev CAGR)
Smallest Margins: DS (10% Gross Margins)
Slowest Growth: JOAN (-2% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: CSPR (+617% Upside Correction)
Overvalued: AXON (-61% Downside Correction)
Full Data:
My Quick Take
JOAN error % is again misleading like the Fintech segment where the y-intercept is much higher than JOAN’s growth rate (BBY, WBA, LOW, WMT, HD also).
CSPR is a pretty nasty post IPO performance, maybe the mattress industry isn’t a desired one haha. CWH, LOVE, PRPL & ELY standout the most to me and PTON is impressive.
Regional eCommerce
Companies looked at: Grab (AGC/GRAB), Alibaba (BABA), Coupang (CPNG), JD.com (JD), Jumia (JMIA), Mercadolibre (MELI), Ozon Holdings (OZON), Pinduoduo (PDD), Sea Limited (SE)
Sector Stats:
Avg Gross Margin: 31%
Avg NNTM Rev CAGR: 46%
Avg EV/2022e GP Multiple: 12x
Sector Highlights:
Strongest Margins: PDD (68% Gross Margins)
Strongest Growth: Tied (63% NNTM Rev CAGR) - PDD, OZON, SE
Smallest Margins: CPNG (16% Gross Margins)
Slowest Growth: JD (25% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: PDD (+167% Upside Correction)
Overvalued: AGC (-59% Downside Correction)
Full Data:
My Quick Take
A very compelling sector where China discount is very prevalent. OZON has some Russia discount baked in as well I would assume. My four favorites trade at the highest premium in the group.
Second Hand eCommerce
Companies looked at: eBay (EBAY), Etsy (ETSY), Farfetch (FTCH), Poshmark (POSH), ThreadUp (TDUP), RealReal (REAL)
Sector Stats:
Avg Gross Margin: 68%
Avg NNTM Rev CAGR: 26%
Avg EV/2022e GP Multiple: 11x
Sector Highlights:
Strongest Margins: POSH (83% Gross Margins)
Strongest Growth: REAL (38% NNTM Rev CAGR)
Smallest Margins: FTCH (46% Gross Margins)
Slowest Growth: EBAY (8% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: REAL (+127% Upside Correction)
Overvalued: TDUP (-47% Downside Correction)
Full Data:
My Quick Take
Another compelling sector which I’m of the opinion has a long runway ahead. REAL showing up again as undervalued and TDUP has had quite the IPO run. EBAY growth smaller than the y-intercept again so be cautious of they - unrelated but EBAY needs to acquire one of these companies before it’s too late if it’s not already.
Social Media
Companies looked at: Facebook (FB), Alphabet Inc (GOOG), Pinterest (PINS), Snap Inc (SNAP), Twitter (TWTR)
Sector Stats:
Avg Gross Margin: 65%
Avg NNTM Rev CAGR: 34%
Avg EV/2022e GP Multiple: 18x
Sector Highlights:
Strongest Margins: FB (81% Gross Margins)
Strongest Growth: SNAP (52% NNTM Rev CAGR)
Smallest Margins: SNAP (53% Gross Margins)
Slowest Growth: GOOG (23% NNTM Rev CAGR)
Scatter Plot Trendline Error %:
Undervalued: FB (+42% Upside Correction)
Overvalued: TWTR (-19% Downside Correction)
Full Data:
My Quick Take
FB coming in on the undervalued side was expected but as a PINS holder nice to see a 23% discount. I want to like TWTR and I would make a standalone YouTube an anchor of my portfolio.
Overview
Sector overview:
Rankings:
Individual Company Undervalued & Overvalued by Sector Overview:
Undervalued & Overvalued by Sector Overview:
This is done using the full dataset trendline equation and acting as if the sector avg/median makeup was its own company.
Thank you for reading this far if you did! I apologize for the long length but I hope it brought value. I look forward to continue making newsletter posts similar to this with my next one being on general screens instead of by sector.
An example of these next types of screens will be:
Gross margins > 30%
NNTM Rev CAGR > 30%
EV/2022e GM < 20x
Let me know if there are any specific screens you would like to see or any newsletter critiques/recommendations. I’m no expert I just enjoy working with data!
- Sean
Great article! Can you speak a little bit more about the final sector level calculations? For eg Auto as a sector is heated it seems but it also feels like we are just getting started there with Biden admin bringing a ton of EV incentives in the space. Same thing for solar / clean energy. Side note... $KPLT jeez.. I am certainly diving deep into that one tomorrow to understand the company!
Great article, thank you. Trying to get my head around some of the underlying formulas but that's on me.