A Growing, Capital-Light Business for 4x FCF
A net-cash business with rising cash flows, priced as if it will stop earning within five years.
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As you might know by now, before stocks, I used to buy and sell small businesses in the real-world.
When I search for stocks I use the exact same valuation framework that I did back then.
The price is probably the most important component.
After all, anything is a bargain at the right price.
Beyond that, I always got excited by businesses that seemed like they would just keep trundling along forever.
Things like waste management, commercial cleaning or niche products that solved a really complex or regulated problem.
Today’s business is one of these.
It’s a business I’d be delighted to own, whole, in the real-world.
The kind of business that is likely to continue generating cash for the foreseeable future.
More importantly, it’s currently priced like it will be dead in just a few short years, but the reality is very different.
It’s growing its revenues and cash-flows YoY, and the business is pretty efficient at converting revenue into owner-adjusted FCF.
In other words, it’s far from dying.
Let’s get into it…