A-Z on IGV: Value Hunt in Software (F-M)

Ajouté : 2026-05-31

[00:00:00]Welcome, welcome, welcome. How's everybody doing? Hope you are doing well. My name is Andrew with Focus Compounding on air live with Jeff Gannon. Jeff, how's it going today?

[00:00:12]>> It's going very well, Andrew. How's it going with you?

[00:00:14]>> It's going great. We hope it's going great with everybody else as well. If this is the first time you are tuning in with us, thank you so much for joining us. Be sure to go check out all of our content that we push out into the investing universe. The best way to do that is to follow me on X at @focuscompound. [clears throat] Go to our website focuscompounding.com to get access to investment write-ups from Jeff going all the way back to 2005. And of course, if you're interested in learning about our money management services, you can reach out to me at [email protected].

[00:00:45]So, in today's podcast, Jeff, we're going to continue on with our A to Z series in the IGV index, which is the software and technology ETF or I should say IGV ETF. I guess it's the ETF, right? Um, it's a a group of stocks in the software technology industry.

[00:01:07]Everyone listening is familiar with it.

[00:01:08]You can go and listen to past podcasts if you want to get caught up on that. We are going to start at F and it's our old friend FICO, Fair Isaac Corp. We are using Guru Focus. They have a very cool feature called Manual of Stocks. You could Google it or find it on the website and punch in a bunch of tickers and get access to this yourself.

[00:01:33]So, definitely really liking it. It's great for the podcast and if you want to try it out yourself, go to Guru Focus and do that. So, Fair Isaac Corp, Jeff, FICO, says significantly undervalued according to Guru Focus, trading 34 times earnings, 30 times price to free cash flow. Founded in 1956, Fair Isaac Corporation is a leading applied analytics company. Fair Isaac is primarily known for its FICO credit scores, which is a widely used industry benchmark to determine the creditworthiness of an individual customer. Uh price to sales 11.62 times. Uh that's come in a bunch.

[00:02:16]Basically, on every fundamental metric, maybe outside of valuation, this uh company like looks pretty strong, right?

[00:02:23]Prof- uh profitability ranked 10 out 10.

[00:02:26]Operating margin, you know, 51 times. Uh just has been an incredible company. Uh the growth rank from uh uh GuruFocus is 10 out 10. Revenue growth has been exceptional. EBITDA growth, basically everything across the board.

[00:02:40]Um but, you know, the valuation has come in somewhat. Uh so, yeah, I want to get your thoughts on that. Let me pull up a uh performance chart right here, so we could look at FICO. Um we've been talking about this company in the podcast since its inception, but you could see, you know, looks like over the past year, the stock is down about 50%.

[00:03:03]Um so, yeah.

[00:03:06]Over the past 3 years, we're still up 46%, Jeff.

[00:03:09]So, it's really come in uh as of recent.

[00:03:12]So, yeah, what are your thoughts on FICO, if you have any?

[00:03:16]>> Um I'm pretty pessimistic on it as a business, um because they basically jacked up their prices a lot. I talked about this a while ago. Couple of years ago, they started doing this where you could tell that there was no volume increases, but the price increases were really high.

[00:03:31]And um I actually saw a The best thing I saw in terms of just explaining this to people is a I guess it was a podcast or a video. Um Who's the big short guy? Is it Steve Eisman?

[00:03:44]>> Yeah, Steve Eisman.

[00:03:46]>> Steve Eisman. So, it it was just him hosting the the show, but there was an equity analyst on there who went through the price increases at FICO and what that would look like as each reseller passes that on and everything.

[00:03:58]But the basic idea of it is that they've greatly increased the price in the last like 4 years.

[00:04:04]Um and they're essentially a monopoly.

[00:04:06]There is a competing um product called Vantage Score.

[00:04:10]Um but it's basically required from the the GSEs and and um that you have a FICO score. And it you know, even absent that kind of regulatory aspect to it to to make it a a um monopoly that way, um there would be a effectively much like a monopoly anyway because um lenders are going to want to have uh some sort of credit score used. Um the price gap is huge between the two of them now. Like I mean, there's some things and that's why I recommend that that interview.

[00:04:43]Uh there's some cases where it's like 90% cheaper probably to to run a Vantage Score instead of running a a FICO score for it. It's a little complicated cuz like I said, there's uh you know, that you have three major um credit reporting bureaus. You pull all sorts of things multiple times during the whole process for applications and things. So, it's not as simple as saying, you know, there's one mortgage application or something and here's how much it costs if you use Vantage Score, here's how much it costs if you use FICO. Uh but because they've raised their prices so much um in such a short period of time, uh I do think that there's a lot of blowback from a regulatory perspective, from a uh press perspective, and that will uh be an issue longer term. Cuz when you have a monopoly like this, you want to run under the radar as much as possible.

[00:05:27]You want to increase your prices, you know, 10% a year for 20 years in a row, never like, you know, 30% in a single year or something. And they've definitely done a lot of that. And I don't know why they've done that. Uh there there's some things that that um uh that there's a little more potential to that maybe since some changes in laws um made their kind of strengthen their position, but I don't really think that's the reason for them doing it. I think it honestly is the stock getting so expensive years ago that it built in such high expectations that they really had to to do this to maintain the good results. A lot of this is just in the last 4 years. So, if we look at the stock in Well, you can first go over the valuation stuff, but I was going to say if we look at their results, you can see we can go through some of the stuff to show indications of the price increases that is more recent. Um >> Yes, no, I mean that's fine. I can pull it up. I mean it's it's always been an expensive stock, right? You can look at EBD Bida in 2024. I mean 65 times, 225 40 times.

[00:06:32]To your point about the monopoly characteristics as well, there's that quote that people always like to talk about how generally companies that have a monopoly are always trying to tell people about how they aren't a monopoly and and vice versa for companies that don't have one, right? Um they've had issues recently with FHFA, I believe Bill Pulte and him talking about I think the desire for a new sort of credit score platform to use in the process as well, which is what originally I think causes sell-off towards you maybe the mid to end of 2025.

[00:07:11]But yeah, no, so it's uh They've been in the news.

[00:07:15]>> So Yeah, so if you look at their operating margin and is an idea and some of that's driven by volume, but particularly what you see for the years 2022 through today. So, if you you know, you can look at gross margin, operating margin both.

[00:07:29]Now, they have two segments and this would really be in the score segment that's driving it, but you can see that the operating margin actually increased a lot. And you know, it went from being about 30% or something not much more than that, to then 40, 42, 57, you know, and here we have we just said 51%. Um, but you can also see that in the in the gross margin, which is a kind of a better indicator of that, which is that they used to have gross margins of 75% or less, and now it's almost, you know, 10 points higher than that. Um, this is a little complicated cuz it's hard to when your margins are that high, it's hard to understand how big a markup that means in terms of your price change, but it's very significant. It's very hard to go from a margin, if you're at 75%, it's hard to get that to an 85% margin, right? Cuz your cost is the other part of that. It's that 25%. So, to get the cost to go down from 25 to 15 or something, you could imagine how much you have to increase price to do that.

[00:08:20]So, you have price increases. They also disclose some things about volume, but you can also kind of figure out things about volume. If there's, you know, we're in not a bull market for for mortgage activity.

[00:08:30]So, and mortgage is not the only thing that they do, but you can guess that there hasn't been a lot of growth in actual credit applications and things and credit demand. So, certainly from 2022 today, most of that has to be price increases, um, and it has to be large.

[00:08:44]And so, that's what has me worried about, why did they do that, and why would they be so, um, careless about the damage that they could do the franchise long term? I mean, but on the other hand, you can argue, look, they've 10xed operating income, right? In the last like, uh, or not 10x, but more than 5x operating income in the last 10 years or something, and in addition to that, they bought back stock the whole time. That these kinds of price increases are how they achieve this, and focusing on on that stuff, and, uh, they've always been not always, but since the last 15 years or so, they've always been, um, really geared towards maximizing profit this way. I just think that it's way too aggressive, and given the the areas that it's in, it risks a lot of, um, government reaction, and even reaction from people in the from other firms in the industry that are their customers, but also potentially their competitors.

[00:09:35]So, I just like long term, I'm very very concerned about what they've been doing the last few years.

[00:09:40]And uh yeah. And look, like I said, they started doing it, you know, several years ago and that stock kept going up for 2 years after that or something, but it's come down since then. Um but I do I do worry that they they're I'm not worry, I think their franchise is not as strong as it was before because the goodwill is just it it's bad. It makes it them seem predatory and stuff in a way that it was that was not the attitude about it before they started doing this, I think.

[00:10:07]>> So, not cheap enough for you is what you're saying.

[00:10:10]>> Uh I mean, I don't know about not cheap enough. That My problem is I'm really worried about just like if it if if this works out, this is a very very strong business that has huge margins and everything, but you do you do have something that depends to some extent on on government um leaving it alone.

[00:10:29]And so, I just think that there's a lot more attention from government, from media things, from whatever, and that's not fully priced into it when you have a monopoly like that. So, it's a monopoly, but it's a monopoly that has the kind of attention paid to it now that like Moody's did after the financial crisis or something. Which doesn't mean that eventually it didn't work out okay for Moody's, but obviously people would reprice it to be very worried about that. Uh this is not an under the radar type monopoly anymore. It's it's uh so, I just I'd be worried about that and then I'd also be worried about what the company's going to do in the future and whether they recognize the risks of what they were doing and whether they're going to change their approach. So, yeah, those would be my concerns.

[00:11:08]But obviously on all the metrics, it's a hugely successful business that way, but it's kind of like we said about magic formula stuff. It doesn't take into account whether it really is wide moat durable or not. Obviously, it's a wide moat amazing business right now, but you can do things that that threaten that in the future. I don't know that's a stock that, you know, Buffett would be buying or something because he'd be thinking about well, what does this do for the future uh for how durable it is. I don't think it is as durable as it was before. I think there are risks. And before, I think it was so cheap, and that's why I recommended like that that video to to check out and stuff because you were talking about something that was a very, very small portion of each application of each of like it's just a very small percentage of the overall spend that either companies have that are in the industry or that you, once it's been marked up and stuff, have as the borrower. So, it wasn't something that people paid a lot of attention to if you're charging, you know, a dollar for it. But if you're charging $10 for it, it's a different thing entirely. And it's just the speed of the price increases and stuff. You don't want to be seen as like a Valiant or something, so.

[00:12:13]>> Mhm. Yeah, good point.

[00:12:15]Okay, next company, FIVN, Five Nine Inc.

[00:12:19]Offers cloud-native contact center software enabling digital customer service.

[00:12:26]Market cap 1.6 billion.

[00:12:30]Um current PE 32 times, current price to free cash flow 10 times, price to sales 1.62 times.

[00:12:39]Um it's come down a bunch since 2021.

[00:12:42]I mean, a huge amount. In 2021, this was like a $150 to $200 stock, and now we're at what?

[00:12:49]$21 Yeah, $21.

[00:12:52]Significantly I wonder why that shows.

[00:12:56]What's going on there? But yeah, let's see what the stock price is on Koyfin.

[00:13:06]Yeah, $21 stock.

[00:13:07]Come down a bunch.

[00:13:09]Um let's see. Even EBITDA trading about 11 to 12 times.

[00:13:15]Um growth itself over the past year, negative growth.

[00:13:21]Past 5 years, 14% annualized. Past 10 years, 20% annualized.

[00:13:26]Still not generating anything too crazy in the form of uh income.

[00:13:33]So, yeah. I don't know. What do you think?

[00:13:37]>> Uh yeah, I don't know. I mean, obviously growth kind of maybe slowed down and profitability improved because even though it was more expensive in the past, it was losing money until uh the last couple of years.

[00:13:48]>> Mhm.

[00:13:49]>> Yeah.

[00:13:51]>> Yeah, pass for me.

[00:13:54]>> It went from 15 times price to sales to like 1.5, just so people know that.

[00:13:58]>> It does happen.

[00:14:00]Doesn't it?

[00:14:02]Okay, next company Freshworks Inc.

[00:14:04]Ticker F R S H.

[00:14:07]Went public in 2021. There's a lot of these companies in this index or in this ETF shelf that uh went public during that time.

[00:14:13]>> It was good timing and you can see the stock price >> Yeah, look at all these stocks. That was like the top. Provides software as a service platform that enables small and medium-sized businesses to support customers through email, phone, website, and social networks.

[00:14:26]This sounds like a uh uh soon to be disrupted by AI, if not already.

[00:14:32]Uh let's see, price to free cash flow 11 times, PE 13 times. Let's look at the growth of this company.

[00:14:39]Um 10-year growth, well, it hasn't been public for 10 years. 15 uh percent annualized over the past 5 years. Over the past 1 year, 21 times.

[00:14:49]Um let's see, operating margin doesn't generate much in the form of profits.

[00:14:54]>> look at that.

[00:14:55]>> Yeah, gross margin very high and gone up.

[00:14:57]>> Yeah.

[00:14:58]>> So, we're talking about 85% and when they went public, it was uh called 79%, so it's gone up a little bit.

[00:15:08]Um so, maybe if this company continues to scale, you know, they start to generate some sort of meaningful profit. Um let's see.

[00:15:18]Yeah.

[00:15:19]I don't know. For me, I'd have to obviously learn about this company. Kind of hard to see from this manual.

[00:15:25]Um but yeah, not much insight I can glean. What about you?

[00:15:31]>> No, and I don't know from this what the difference is with this and say like a customer relationship management thing, right? So it I don't know what that means. Software as a service to enable small and medium businesses to support customers through email, phone, website, and social networks.

[00:15:45]>> It does, but maybe use it in addition to a CRM. I don't know.

[00:15:51]Yeah.

[00:15:53]>> Next company, Fortinet, FTNT.

[00:15:57]GuruFocus score, 94 out of 100.

[00:16:00]Um $88 billion market cap.

[00:16:02]Platform-based cybersecurity vendor with product offerings covering network security, cloud security, zero trust access, and security operations.

[00:16:12]You know, I thought about cybersecurity as a um theme with a long-term tailwind. To me, that seems pretty obvious, especially with AI, that cybersecurity is going to be something that um you know, could do well over the next few years or whatever.

[00:16:30]Um not sure if you have any thoughts about that, but growth rank 10 out of 10, 10-year 24% annualized, 5-year 24%, 1-year 18 1/2%. Uh EBITDA growth has been good, operating income's been good.

[00:16:47]Can look at uh price to free cash flow, 30 seven times.

[00:16:55]I mean, this is a GARP-ier company. I don't know if it's a reasonable price, so we'll just call it a growth company.

[00:17:04]Um yeah, let's see. Gross margins, phenomenal, and they have gone up over time. In 2016, gross margins were 73 and 1/2 percent today, 80% Uh Pretty much everything's gone up.

[00:17:23]Earnings, EBITDA, >> Mhm.

[00:17:27]>> margins, all across the board.

[00:17:30]Yeah, this looks like a dominant business.

[00:17:33]>> Yep, and it's rated, you know, by GuruFocus as as almost perfect, right?

[00:17:37]>> Mhm. Mhm.

[00:17:38]>> But I guess it says that it's somewhat expensive. I mean, we have a few that are cybersecurity things and I don't know what to make of those. Obviously, I don't know what people's um feelings are about that with AI and all of those things um about how much that introduces um changes in that industry.

[00:17:55]>> Would you think that it's, you know, cybersecurity's only going to be more in demand?

[00:18:02]Because how easy it's going to be with AI and everything to, you know, scrub websites, do this, do that, look at um potential security issues, send lawyer letters.

[00:18:15]>> I [laughter] mean, I mean, it might it I don't know. Um This is This is one of those things where I don't know if it's something that is fine and unaffected by it, you know, that there's just that there's even more demand and more willingness to pay for those things, or whether it's something that is replaced largely by AI stuff. Um The kinds of things that AI can do pretty well compared to people and at not very high cost is kind of like prospectively just testing like um and then if there's something that you can actually say, yes, this did work, or no, this didn't work, um you can find a lot of probably flaws and things, and you can also um see if uh there there's ways to exploit that and stuff, right?

[00:18:57]So, um I can see that potentially changing how some of these things are done, but again, like with the AI things we've been talking about generally, it's the same with CRM stuff or whatever. I I know what that means, if that just changes how the company does it themselves and that changes nothing about what you're going to subscribe to and use um even though everything about their process has changed, right? So, what they may be doing is all sorts of different, but from their customer's perspective, it may not be very noticeable that way. And that's why I find it hard to know what things AI will disrupt and what they won't because you could disrupt a turn turn of the process stuff without disrupting um your uh portfolio the customers that you have and everything, which is really what matters economically to the business. It doesn't matter if you have all different ways of of doing um performing the functions inside the company that you do. It just matters if you have all these, you know, you can see they're big I mean, there's other ways to break down, but it's ton of subscription revenue that they have.

[00:19:52]That's obviously what it really is from from the operating margins things like that. They probably have very low customer churn and all that. And if that continues to be the case, then then uh the business will look much the same even if the technical aspects of what they're doing is radically different, right? Even if they have a lot fewer employees and use a lot more AI or something, what does it matter to the to the stock and what does it matter to the customers? I don't know.

[00:20:13]Right? Um So, that's the I cyber security is one of those that falls into that where I really have no idea.

[00:20:19]>> Got it. Let's move on.

[00:20:21]Gen Digital Inc., ticker GEN, $14 market cap. Another cyber [clears throat] security.

[00:20:28]Uh it says pure play that offers security, identity protection, and privacy solutions to individual consumers.

[00:20:36]Um let's see.

[00:20:38]Oh, they have uh brand such as Norton.

[00:20:41]You know, Norton, when I think of Norton, Jeff, I always think of like being on a very old PC, like 20 years ago.

[00:20:47]And Norton would lock you out of your own computer. I don't know. I just that's my association with Norton uh security.

[00:20:56]Um price to free cash flow 9 and 1/2 times PE 15 times. Growth numbers uh a lot different than the previous company we looked at.

[00:21:07]>> Mhm.

[00:21:07]>> 10-year about 4% 5-year annualized about 13% over the past year 28%. So, you got some recent growth there in revenue. Uh EBITDA growth uh has been decent as well recently.

[00:21:21]Look like it's uh picked up a little bit. Um uh yeah, we can look at some uh gross margins and well, it's gone down a little bit. So, you know, maybe there's competition there they're losing to uh FTNT that we just looked out looked at before. Uh net margins have gone down and been all over the board.

[00:21:44]You know, I think it's it's great. The GuruFocus score which focuses a lot on predictability, you could really see the difference between this company and the company that we just looked at and the respective GuruFocus score that it received, right? This is doesn't look like uh on a predict predictability scale this one uh where the other one was I think five. Um >> Okay.

[00:22:05]>> So, it looks at a lot of those things.

[00:22:07]>> Yeah, and I think the reason for that probably is that um FTNT as opposed to GEN, um must be focused on enterprises and stuff. I think it um whereas this is obviously focused directly on on individual consumers, which is what they say in the business description. And if you know the brand names, that's completely what they're focused on. Um so, it does mean that it's different.

[00:22:28]They probably do a ton more marketing uh things. And then also, I would imagine that the individual consumers who use these products don't have a very good idea about whether they work and what they do or anything like that. If you're using Norton or any of these other things. Um so, I I don't know. It seems like it's probably more of a marketing thing than having to have an evaluation of whether the um the uh whether it's likely to be disrupted by things that we were talking about. I think that's less of a concern here.

[00:22:55]More of a concern would be what the um whether the public will keep buying it.

[00:22:59]Um it is much cheaper than the other things we talked about. So, we should that out that like the the EBITDA here is EV EBITDA here is like 1/4 to 1/3 most of the stocks we've been looking at. We've been looking at stocks in the 20-30 range, and here's a stock that's at, you know, eight or nine.

[00:23:13]>> Mhm. Mhm.

[00:23:15]Okay, next company GitLab Inc. GTLB.

[00:23:20]Um market cap 3.8 billion.

[00:23:24]Says it operates on an all-remote model.

[00:23:27]GitLab is a complete DevSecOps platform delivered as a single application.

[00:23:33]So, I don't really understand what this company does. Obviously, I've heard of GitLab. I think, unless something is something else. I don't know if they like open-source code on this thing or if you need code, you go and get it from GitLab. I'm sure that's not true, but um you know, I've heard of the name and somewhat familiar with it. Something to do with code, um but other than that, uh do not know.

[00:23:57]Uh let's see. Went public in 2021. There you go again, and uh go figure that was the top.

[00:24:05]Uh looks like it went public at $130, and it's $22 here today. Good lord, that's crazy. Um uh revenue per share has gone up. Let's look at growth. Um 5-year 31% annualized over the past year 21 uh percent EBITDA growth. Looks like over the past year, they actually don't generate any sort of EBITDA. You can look down here. Nope, it doesn't look like they've ever generated any EBITDA.

[00:24:32]Um cash flow from operations in 2026, uh looks like uh 232 million.

[00:24:42]So, and this is the 3.8 billion-dollar market cap. Price to free cash flow 17 times.

[00:24:49]Um price to sales about four times.

[00:24:52]So, yeah.

[00:24:55]>> I mean, I don't know what it does, so I can't tell you. Uh uh on sort of certain uh quantitative measures here, the two things that stand out are it actually looks financially like compared to some of the things we've looked at that haven't generated earnings in the past, it looks financially fine.

[00:25:16]Um like it doesn't look like it's about to go out of business or anything.

[00:25:19]>> Yeah, I don't think this is the company I thought it was. Maybe I'm thinking of GitHub. Yeah, I'm thinking of GitHub, I think.

[00:25:24]>> Okay.

[00:25:25]>> I don't know.

[00:25:26]>> And um >> Yeah, I'm thinking of GitHub. So, I don't know what GitLab is.

[00:25:29]>> Okay. And then it has it's uh growth and it's uh revenue growth is actually very rapid, too. So, if you look, it has high revenue growth and it has it like as compared to some of the others actually has tangible book value. You can see it has cash. If you look like um current ratios and things like that, like it it actually isn't financially distressed. So, it has a adequate balance sheet for the short term and it's growing very quickly. So, I have no idea what to say on it because obviously it's lost money throughout its history, still losing money, but at that price-to-sales ratio and those gross margins, if it's going to grow fast, uh you know, I can't say that it's a bad stock at this price, actually. Like if you have a price-to-sales of four and you're growing at 30% or something, uh it is hard to say that it's a mistake to buy it.

[00:26:21]I just have no idea if that growth will continue or anything about the business, but I'm just saying like just on that math of price-to-sales and and revenue growth, it is kind of when we talk about growth at a reasonable price or something, it actually isn't crazy.

[00:26:32]>> Got it.

[00:26:33]Uh Guidewire Software Inc. ticker GWRE provides cloud-based software solutions for property and casualty insurers.

[00:26:44]Um okay.

[00:26:46]Um $10.5 billion market cap, trading 56 times earnings, 37 times price to free cash flow.

[00:26:57]Growth 10-year growth 9% annualized, 5-year growth 10% annualized, over the past year 20%.

[00:27:05]Does not appear to be cheap at all.

[00:27:12]But let's see, price to sales eight times.

[00:27:17]Um Yeah.

[00:27:20]Gross margins have been improving somewhat recently. 2022 looks like was the bottom for that 46% and now we're at call it 62 to 60 63%.

[00:27:36]Yeah.

[00:27:38]Operating margins are starting to scale higher, right?

[00:27:42]Yeah, doesn't seem cheap.

[00:27:45]Be tough to evaluate.

[00:27:48]>> Yeah, I mean the obviously it's speculating on something in the future because the past growth and stuff we saw is not consistent with a stock that's this expensive, but >> Mhm.

[00:27:58]>> it is true that I'm like where it shows the Joel Greenblatt numbers and stuff, it is very high and you can see some things in terms of that it doesn't really have much in the way of assets and it does have good gross margins and stuff. So the unit economics are probably terrific. But you know, that doesn't necessarily mean that it's actually made a lot of money cuz as you can see it's reported losses historically. Um it is kind of a high price for a low growth, you know, um but the growth actually in the last what two years or something was pretty good. The growth real recently is faster than I was looking at longer term, I think.

[00:28:35]Um cuz like five and 10-year growth is only like 10%. It's not very high for a software type company.

[00:28:42]You know, or I should say company priced at eight times sales.

[00:28:46]>> Next company HubSpot Inc. Ticker HUBS provides cloud-based marketing, sales, and customer service offer platform referred to as the growth platform.

[00:28:57]Um Okay, let's see.

[00:29:00]Uh 9.3 billion dollar market cap.

[00:29:06]Uh growth Well, this has had some pretty incredible revenue growth. 10-year 27% annualized, 5-year 24% annualized, and then over the past year about 19% annualized. Uh even to EBITDA says current uh 29 times.

[00:29:23]Um Let's see. EBITDA has been exploding higher. A few years ago they they didn't generate anything in EBITDA and it's gone Let's call it in uh 2023 74 million negative 74 million dollar loss from an EBITDA perspective.

[00:29:42]Uh two out of TTM basis 266 million. So, that's why you see that multiple really start to come down cuz they started to generate a good amount of EBITDA. So, growing into the multiple uh has always generated a pretty decent amount of cash on a TTM basis about 800 million. Again, this is a 9.3 billion dollar market cap trading 16 times price to free cash flow. Looks like in 2025 the stock price was way higher um at the beginning of the year and it's come down a bunch to 182 dollars. Looks like it was like what? Close to 800 dollar stock. So, it's down a bunch.

[00:30:20]>> Yeah. Um it looks like >> Down it Wow.

[00:30:26]>> Yeah.

[00:30:28]It's down about 75% the last couple years if that if the market cap and and share information is correct.

[00:30:34]Um >> Yeah.

[00:30:36]>> So, yeah.

[00:30:38]Now, that was cuz it was very expensive.

[00:30:39]It had a price to sales over 10 like we said before. If you look back two or three years ago, it was at a price to sales like 13, now it's at like three.

[00:30:46]So.

[00:30:48]That's the adjustment, which is interesting cuz it happened at the time where it actually started generating positive EBITDA, basically.

[00:30:53]The time to to own it in terms of it going up over a few years was when it had rapid um revenue growth, but not um uh but not EBITDA. And then since it started generating EBITDA, it's actually um done worse as a stock. Done badly as a stock, down like we said 50% in year-to-date in what, 1 year? 70%?

[00:31:15]So.

[00:31:16]Yeah.

[00:31:18]>> Any thoughts on the business itself?

[00:31:21]>> Uh nope.

[00:31:23]I mean, it's similar to a lot of ones that we talked about before. I don't know enough about that to answer.

[00:31:27]Obviously, AI is really good at selling people things. So. But again, I don't know if that means that it's used that way. It depends on how integrated that is into what you do and whether that means there'll be a lot of disruption or or not.

[00:31:39]>> Do you ever think like when you compare a company like that to a company like Meta, is it just better to buy Meta, which is growing like crazy, is really good at placing ads, and and has this just insane ad business?

[00:31:52]>> Mhm.

[00:31:53]>> Yeah. Okay, let's see. Hut 8 Corp.

[00:31:57]Um Let's see.

[00:32:02]Ticker HUT, $12 billion market cap. Is it an energy infrastructure platform that integrates power, digital infrastructure, and compute at scale to fuel next generation energy intensive use cases.

[00:32:16]Okay.

[00:32:18]Uh GPU as a service. Interesting. Big Bitcoin mining.

[00:32:23]Uh yeah, easy pass for me. As soon as you hear that, right?

[00:32:27]>> Yeah, I'm trying to figure out what it does. I would assume that it raises money and then invests in in this stuff, basically. There's just the physical um infrastructure that we're talking about from everything that it says. So.

[00:32:37]>> Mhm. Mhm.

[00:32:39]>> Next one InterDigital Inc. IDCC $6.9 billion market cap is a research and development company focused on wireless video artificial intelligence and related technologies. Okay.

[00:32:55]Um let's see. The majority of revenue is generated from fixed fee patent license agreements. Interesting.

[00:33:05]Interesting. Currently trading 25 times earnings, about 18 times price to free cash flow.

[00:33:13]Um year-to-date down 15% 10-year number on revenue is about a decent 7%.

[00:33:22]Uh 5-year about 20%, but then over the past year uh -9.3%.

[00:33:31]Uh so you had negative revenue, negative EBITDA, negative operating income across the board over the past year.

[00:33:37]Um let's see what else.

[00:33:42]Gross margins are very high.

[00:33:46]About 89% which has gone up a bunch.

[00:33:51]Um yeah.

[00:33:53]Operating margin is pretty good.

[00:33:54]>> all the businesses we looked at before. You can see about 2 years ago or something something changed because its revenue and stuff jumped. Whereas before that it just looked like a flat licensing business all the time. It doesn't look like a software business or anything of the ones that we're comparing it to. Um you know, it used to be a low like EBITDA was like, you know, five, eight, those sorts of things. You could see everything else and predict really that it's kind of like what it's describing.

[00:34:17]Um but then something obviously changed.

[00:34:19]I guess they have something that they licensed that was a lot more money that they were getting because uh you could see that revenue like went up um uh well, it almost doubled in a couple years. But if you look at the results before 2022, it's a very, very flat um type business in a lot of the those things. So, um yeah, but totally different than everything else we talked about. Lower multiple, uh although a higher multiple now than it was before, and then like generates a lot of free cash flow and all that. So, just look and slow growth, right? Um revenue growth is in 7% or something. So, >> Mhm. Mhm.

[00:34:54]Next company, In Tap Inc., ticker INTA.

[00:34:58]It's a provider of industry-specific cloud-based software solutions for the professional and financial services industry.

[00:35:05]Okay, it empowers private capital, legal, accounting, and consulting firms with a technology needed to meet rapidly changing clients, investor, and regulatory requirements.

[00:35:18]$1.6 billion market cap.

[00:35:22]Went public in 2021.

[00:35:24]Shocker.

[00:35:26]Um 5-year revenue has been annualized at 2% over the past year. It's up 10%.

[00:35:33]Uh not a lot data to analyze.

[00:35:37]Um let's see. Trading 13 times price to free cash flow.

[00:35:43]Does generate cash.

[00:35:46]Um yeah.

[00:35:48]I don't know.

[00:35:49]Probably a pass for me.

[00:35:51]Just not enough information. Next company, Intuit, ticker INTU. A perfect score on the predictability scale from GuruFocus.

[00:36:01]Uh $104 billion market cap. Serves small, medium, and Intuit serves small and mid-size businesses with accounting software. Uh QuickBooks. Everyone listening is familiar with that. Uh growth rank, 10 out of 10 over the past 10 years, 16% annualized over the past 5 years, 18% annualized over the past year, 18%. Um pretty much everywhere you look from the past record, uh uh, very dominant business, right? Massive gross margins, very strong operating margins.

[00:36:36]Um, generates a lot of cash, generates a lot of free cash flow.

[00:36:40]Uh, but it's trading 16 times price to free cash flow, so it's come down a little bit. And about 25 times earnings, right? The biggest, uh, sort of AI talk recently has been, you know, what's going to happen to the QuickBooks? Is this something for the majority of people that Claude or ChatGPT could could do for you? Produce that file for you? I don't know. I don't know if people will be comfortable with it or if they won't be comfortable with it. Or if Intuit will just integrate their own system with AI themselves, and you know, just continue on, which is probably the likely scenario.

[00:37:17]>> Yeah, I mean, can AI do it? Probably, sure, but again, like there's other things that can QuickBooks is not the only choice for doing it now. Um, same as Mailchimp. Um, yeah.

[00:37:31]It this looks a lot like Adobe. It's the same kind of questions that we had before and everything.

[00:37:35]>> So, the concern is like small businesses year to date.

[00:37:38]>> don't use accountants at all, cuz quick So, QuickBooks has a QuickBooks, and then there's also another thing which is for the accounting profession that's kind of related to QuickBooks, which is where you actually have CPAs and stuff, and that's kind of what they market through a lot of the times is through CPAs. Um, but I assume that some people just use QuickBooks without having any CPA at all who are smaller customers.

[00:37:58]Um, which is a little different than trying to get accountants to use QuickBooks.

[00:38:03]Um, so you're saying like people who don't have accountants because they would just use some alternative QuickBooks, and they'll never use an accountant. Mhm. That's what people are worried about?

[00:38:13]>> Yes.

[00:38:14]Or they're worried about the accountants switching to >> I mean, maybe both. No, no, I think it's it's individuals, yeah, is what I generally hear.

[00:38:22]>> Oh.

[00:38:23]Yeah, I don't know. Um seems weird to me that you want to just use whatever QuickBooks says uses AI to do whatever they want to do instead of trying your own product to do it for.

[00:38:35]But uh but if you're saying could people create things that looks just like QuickBooks and could it work as well and stuff? Maybe. I mean, that does seem like the kind of thing that AI could do without much difficulty.

[00:38:44]>> Mhm. Mhm.

[00:38:46]Next company, Samsara Inc.

[00:38:49]IoT's the ticker.

[00:38:51]$16 billion market cap.

[00:38:53]Uh provides an end-to-end solution for operations. The company's connected operations platform consolidates data from its IoT devices and a growing ecosystem of connected assets and third-party systems.

[00:39:07]It makes it easy for organizations to as uh access, analyze, and act on data insights using its cloud dashboard.

[00:39:16]Okay.

[00:39:17]Um Doesn't generate uh any sort of earnings. Doesn't generate EBITDA.

[00:39:26]Uh barely generates cash flow.

[00:39:29]Um I mean, obviously, you know, $236 million is a lot of money.

[00:39:34]Uh but when you compare that to a $16 billion market cap, I would say that's not cheap. Price to free cash flow, 78 times.

[00:39:42]Uh stock is down 21% year-to-date and 42% over the past year.

[00:39:50]Uh this would just be an easy pass for me just from looking at it from a quantitative perspective.

[00:39:55]>> Mhm. Yeah, it is interesting the stock has not come down all that much. I mean, it's down like in the last year or something, but if you look over the entire time period that's been public, it I guess it came like one two years later than we talked about the other ones, but I mean, it's interesting that it's it's been a pretty expensive stock that whole time. It's been around 10 times sales during the whole time. I I know that like uh internet of things stuff was that popular. Uh >> Mhm. Mhm.

[00:40:21]Next company Klaviyo Inc. Ticker KV Y O.

[00:40:26]Market cap 4.3 billion.

[00:40:29]Uh they provide a software as a service platform to enable its customers to send the right messages at the right time across email, short messages service, and push notifications.

[00:40:41]More accurately measure and predict performance and employ specific actions and campaigns. So, it sounds like a marketing company, I guess you could say.

[00:40:50]Um >> Yeah, it sounds like marketing through text, basically, right?

[00:40:52]>> Mhm. Mhm.

[00:40:54]Uh went public in 2023. Stock has gone destroyed year to date, down about 56%.

[00:41:04]Uh doesn't generate any sort of earnings.

[00:41:07]Uh cash flow from operations TTM was 237 million.

[00:41:13]What did I say? This is a 4.3 billion-dollar market cap.

[00:41:17]Um Let's see. Revenue growth over the past year, 17 and 1/2%.

[00:41:24]Uh gross margins have gone up a little bit from, call it, 71 to 75 if you round up.

[00:41:34]Um yeah, not a lot of information on this company. Hasn't been public for that long. Next company Life360 Inc.

[00:41:41]Ticker LIF. 3.2 billion-dollar market cap. World's largest family-focused social network with nearly 100 million monthly active users.

[00:41:51]That's so funny.

[00:41:53]World's largest. I I've actually like never heard of their platform.

[00:41:56]Um so, okay.

[00:41:59]Uh let's see.

[00:42:02]Trading 40 times price to free cash flow, 23 times price to earnings.

[00:42:06]Um what about price to sales? About 6 and 1/2 times, so not cheap. Uh revenue growth has been very strong.

[00:42:14]Um, over the past 5 years, 30% annualized revenue growth over the past year, about 21 times.

[00:42:22]Uh, EBITDA is as, you know, they're starting to generate a little bit EBITDA.

[00:42:26]Um, cash flow from operations, not as much as you would think for the world's largest family-focused social network.

[00:42:36]Um, It sounds like it's for tracking pets.

[00:42:40]>> Tracking. Okay, so I'm actually pretty interested in this. Yeah. Mhm. Yeah.

[00:42:44]Yeah.

[00:42:45]>> like. It sounds like an AirTag tech thing. Yeah.

[00:42:49]>> Got you. Got you.

[00:42:52]Uh, probably a pass for me. Stock has gone absolutely hammered year-to-date.

[00:42:57]Uh, down 38%.

[00:42:59]>> Yeah. Um, it, let's see.

[00:43:04]Um, if we go down, let's see, to It does generate free cash flow. Um, it has, but it's like, yeah.

[00:43:14][clears throat] Until last year, it had never had a year that was above, what is that, 20-some million.

[00:43:21]And you have a price that's pretty high versus that, too. So, I don't I don't know. I mean, like you said, it is growing fast, but you don't have a lot of other things going for you on it than that.

[00:43:31]>> You see the insider trades? All sales.

[00:43:34]>> I've haven't been commenting on that, but if there's buys, I would have mentioned it for any of the stocks we're looking at. They're all insiders. Just selling all the time for every stock we've talked about, basically.

[00:43:44]>> Yeah.

[00:43:45]Next company, Lightspeed Commerce Inc., LSPD. [snorts] $1.2 billion market cap. GuruFocus says possible value trap, think twice. They provide omnichannel commerce-enabling SaaS platform.

[00:44:00]Its software platform provides customers with functionality it needs to engage with consumers, manage their operations, accept payments, and grow their business.

[00:44:09]Um went public in 2019, really shot up uh in 2021, like other companies in this uh ETF.

[00:44:20]Um let's see what else. Revenue over the past 5 years, 40% annualized. Over the past year, 24 percent.

[00:44:28]Um uh trading >> Loses a lot of money, grows fast. It's interesting because compared to other things we looked at, it like loses significant amounts of money, but also has grown pretty fast in the last um few years.

[00:44:41]>> Hasn't generated any sort of cash flow from operations ever.

[00:44:44]>> Well, yeah, and this is the thing. So, this is one of the few times where it's given you a severe Sloan ratio, um which you never see here. If you look over the warning signs, it has incredibly low generation of cash um compared to like what it reports in accruals and everything, which is a a very low um quality of earnings kind of thing.

[00:45:05]So, that is interesting that it grows fast, but it has really poor profitability things. But that's basically what it's telling you throughout all the the data here is that the profitability is really poor, but the growth is high. I don't know where that growth comes from. With any of these, we don't know if they're acquiring things, if they're growing things. They have a direct sales force, they they said, which most of them have not called out that they do that. Um but you can just see that. You also see that in balance sheet things like actually, you know, it's lost $2 sorry, $2 billion of equity in the last 3 years or something. You know what I mean? So, most of the um you just see that it's lost money, basically. But not just on accrual basis, but significant cash losses. Most of the other ones, they're probably not as good as they look because of how the they they like through share issuance, but otherwise when we're looking at cash flow, it's accurate except for the fact that they're probably issuing shares, you know, software companies to their employees that isn't properly captured by that. But here, they actually have been burning cash except for the last year, at which point they barely generated any. So, it just has very poor light cash generation versus its its um uh revenue and stuff. It's something to call out because it's different than everything else we've looked at.

[00:46:12]>> Next company, Manhattan Associates, Inc.

[00:46:15]Ticker MN M A N H provides software that helps users manage their supply chains, inventory, and omni-channel operations.

[00:46:23]Customers are generally retailers, wholesalers, manufacturers, and logistics providers. 7.6 billion dollar market cap. It's trading 21 times price to free cash flow, 36 times price to earnings, uh 26 times EV to EBITDA.

[00:46:40]Uh growth has uh been pretty decent over the past 10 years, 9% annualized over the past 5 years, 15% over the past year, uh 7% and I am talking about revenue. Um let's see.

[00:46:58]Generates about 400 million in cash flow from operations.

[00:47:04]Uh operating margins have gone up, so is gross margin.

[00:47:09]Uh everything looks like it's been up and to the right a bit. It's down about 25% year-to-date, the stock.

[00:47:17]Yeah, what are your thoughts?

[00:47:19]>> Yeah, I don't know. It's interesting because I don't know enough about what the company does. Um you can see that it's probably for very large customers because it says it only has 1,200 customers in the entire world. Um which is really really low. Um so, it must be uh tools for very large companies to manage um those that they were talking about there. Um just to give you an idea. So, um because you wouldn't have, you know, what? They've been in business 35 years and they only have 1,200 customers. So, those have to be huge customers to generate the kinds of um numbers that we're seeing. Mhm. So, yep.

[00:47:55]>> All sales recently bought by insiders as well.

[00:47:58]>> Yeah, that I've been watching it. If there was one that was buys I'd mention it I look every time.

[00:48:03]>> Next company Mara Holdings ticker M A R A we could pass it it secures the blockchain ledger and supports energy transformation by converting blah blah blah blah blah. So good to go to the next one with that.

[00:48:17]Microsoft ticker MSFT perfect score on the predictability scale GuruFocus says modestly undervalued at $409 per share it's down about 15% year to date.

[00:48:32]Um you know, it's Microsoft, right? Price to free cash flow 42 times price to earnings 24 times.

[00:48:41]Uh revenue growth over the past 10 years 14% over the past 5 years 15% over the past year 18%. Um they obviously are in bed with open AI and chat GPT.

[00:48:53]Um one of the most dominant businesses in the world is Microsoft. Yeah, what are your thoughts?

[00:49:00]>> Thoughts are generally that you know, the most of the businesses like it was before but if we look down below I think that we get some ideas from cash flow and stuff about what things have changed. Um the it is now like all these other ones that that we have you know it compares to Oracle and stuff here. It is going to change a bit in terms of having a higher investment in physical assets and things like that and lower free cash flow over time. So you can see that in the last like I don't know four or five years EBITDA's doubled. I think it went from like a 100 billion to 200 billion or something but free cash flow is not up that much. It's like you know um gone maybe 1.3 times up or something so you have like a 100% increase in EBITDA and only like a 30% increase in free cash flow. The difference of that is obviously CapEx and and spending on things like that. So that'll probably be typical if we were looking at Alphabet or Meta or whatever the other companies Amazon the other ones that do that. Um there is one insider buy here, but I assume that was like a new director or something. I don't know what that was. But there you go. Someone bought 5,000 uh shares.

[00:50:07]>> There you go.

[00:50:09]We could finish M with uh Strategy Inc. ticker MSTR.

[00:50:16]>> Yeah, I would avoid this one.

[00:50:18]>> [laughter] >> A Bitcoin treasury company.

[00:50:22]Uh Michael Saylor? Saylor?

[00:50:25]>> Yeah.

[00:50:25]>> Is the CEO.

[00:50:27]Uh wears the black shirt with the Bitcoin logo.

[00:50:30]They issue shares and buy Bitcoin, right?

[00:50:36]Um so definitely the poster boy for for everything going on in Bitcoin and and uh that's uh I imagine that's a pass for you, Jeff.

[00:50:45]>> Yeah, just cuz of who's involved with it and what they do and stuff. Yeah.

[00:50:48]It has a high risk of, you know, stuff that you don't want happening happening with it eventually, probably.

[00:50:54]>> This one seller looks like he's he's selling a lot of shares, a director.

[00:50:59]>> Yeah, I mean the company's pivoted, but it did exist in a different form, like, right? Uh when did they was I IPO'd in 1998? Yeah, that's accurate. So it it was a kind of darling or whatever in probably 2000 or something and you can look up its history and his history with the company and everything for what I'm talking about, but this was a um a popular stock in the last boom and it's popular again in in this one.

[00:51:24]>> Mhm. Yeah, he's at the front of everything >> 20 years in between.

[00:51:28]>> Right. Yeah.

[00:51:30]Got it. Cool. Well, I want to thank everyone so much for tuning in with The Wealth Boss on the Focused Compounding podcast. Uh be sure to hit the subscribe button wherever you are watching or listening to us here today uh so you could be notified every time that we upload a new podcast. And of course, if you're interested in uh learning about our money management services, you can reach out to me at [email protected].

[00:51:54]We will continue on with our A to Z series until we're almost done or until we are done. Looks like maybe we have about two more podcasts dedicated to that and we will start next week at N.

[00:52:09]I want to thank everyone so much for all the support and we will see you in the next podcast. Take care.