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Thank you for watching our video. If you are new to the channel and you like this video, please subscribe and share it with your friends. I want to remind everyone: these are idiots from the world of YouTube and investments, be sure to give them your regards. So, we have three stocks at 52-week lows.
First, let's move on to our stock analysis tool. And everyone who has our software, please follow along with us. It's very simple. If not, just watch the video, listen, and it's great. So, Align Technology, this company deals in clear aligners. Is this Invisalign? This is Invisalign. So look at the stock price, guys.
This is over the last year. Reached a high of 737 and a low of 225, guys. This is a drop of more than 60 percent. The price is now 246. We're up a little bit from the low, but remember, I want to repeat this over and over again about our 52- week lows. It's amazing how far stocks can fall when they're ready to fall, because remember, it's easier to go down than up.
So let's quickly move on to the eight-pillar tab. So guys, here's what we have here. We have all eight pillars here . And that's exactly what we like to see, actually. Even with these two crosses , these are the two evaluation indicators that we have. Other indicators look good. They are buying back shares.
Not necessarily good overall, but very low debt, increased cash flow, net income, revenue, and high return on investment. This is great . So, it just tells us to be careful. Maybe they are overrated. So the question you have to ask yourself is: are they overvalued? Because remember, if you've watched our videos, you know that a company that's growing 100% per year, compared to one that's not growing at all, can justify a much higher P/E ratio or price to free cash flow, right?
This is quite logical. If two companies are exactly the same today, but one grows 100% per year for 10 years and the other doesn't grow at all , which one would you pay more for? This is pretty obvious, right? So how do we define it? Let's move on to the stock analysis tool. This is our most popular tool in our software .
And the reason is that it allows you, as an investor, to sit down and make a selection, deciding what assumptions about the future you are going to make, because every investment is the present value of all future cash flows. So you make your assumptions here, looking at 1 , 5, and 10 year data, and that tells you how much to pay for the stock based on today's assumptions.
Remember, this doesn't take into account the balance sheet, but from a cash flow perspective, if the numbers meet certain criteria of your assumptions, it's a signal that it's time to move forward . So, right now, Invisalign is growing. But remember, guys, it's hard to maintain high growth rates for a long time.
And my job as an investor, and your job, hopefully while you're learning, is to be conservative , because there are tens of thousands of companies in the world. Be conservative in your assumptions and find those 20, 30, or 40 companies that fit them. True? So I'm going to sit here now. I will choose 8, 11, and 14%.
I just pulled these numbers out of nowhere. I have n't researched this company at all yet. I want to make very conservative assumptions. Again , if I see a lot of green at the end, that tells me: keep researching. Profitability of profit. Now the profitability will probably remain pretty similar, but I'd still be a little conservative.
I'll take 22, 24, 26. Free cash flow return, I'll take 8, 17. No , I'll take 18, 19, and 20. P/E, guys, 14, 16, 18. This is probably the most confusing point for newbies to the channel, but trust me, P/ E reflects competitive advantage and growth potential, and it 's hard to justify very high P/E numbers in general.
Companies slow down over time, especially as they grow, it becomes harder. Invisalign is a well-known brand, so I can justify having some preference, but again , my job is to be conservative. And finally, the desired annual return, I usually prefer 12.5%. And the reason is that I can get 9 or 10% from any market ETF.
I choose 12 to have a sufficient margin of safety and at least some reason to buy individual stocks rather than just investing in ETFs. So , the stock is now worth 246. I click the analyze button at the bottom. Good. Well, guys, here's the good news. Look at this. We have three green and three red indicators.
And these three red ones are bad. This almost reached the discounted cash flow level. So what does this tell me? The first thing I'll do is click the plus sign in our software so that it notifies me when the stock reaches the price I want. This way, I will receive a notification. In the meantime, I'm using this as an excuse to research the company more deeply .
Promotion number two, GE. Now let's check GE. I open GE in our stock analysis tool. GE is a very diversified company. As for GE stock, guys, it's a complicated case. Let's look at the maximum chart for GE. Do you know how big GE was in 2000? If I told you 22 years ago that this stock, worth $470, would be selling for $66 22 years later.
You would say, "Damn, GE is down 85%, no chance." A drop of 85%. No chance. This company was supposed to soar to the skies . I mean, look at this. 20 years ago, their revenue was $126 billion. 116 billion. Guys, look at this. Last year they received 74 billion in revenue. They have now sold off many units.
But here's what's scary about GE and makes me hesitate to continue, even though it's at a 52- week low. When was the last time they made a profit? They have only made a profit four times in the last 10 years. That's all. They have lost money every year for the past 5 years. Does this mean they should be avoided?
No. It just means to me that there are much better opportunities. Let me find them. Don't overexert yourself. Don't try too hard to make the company work for you. Just move on. Find something you can understand better. In addition, GE has a lot of credit. It's a difficult balance. It's not as simple as selling a product or spending money on it.
It's not that simple. So in my opinion, even though the stock is at a low right now, if you evaluate it from a value perspective, I would prefer to go further. Stock number three, TSM, Taiwan Semiconductor. This is interesting, because you've all heard that the chip industry, the semiconductor industry, has been taking off lately because of the chip shortage, right?
So, look at the stock price. Peak 145. It is now actually at its 52-week low, with a difference of a dollar or two. Well , let's see. It could be Oh, look at that gross profit. That's pretty good. Gross margin 53%. The average five-year profit margin is 36%, last year it was 38%. Oh, I'll tell you what.
That's why we're looking at this on the main page. If you follow our software, you probably saw this dividend yield of 2.3%, payouts of $9.2 billion. Free cash flow last year was 13.4. The average indicator for the last 5 years is 8.6. Even if the next five years are the same, that's a significant portion of free cash flow going to dividends.
Be very careful here. Don't fall into the dividend trap. One thing you'll learn on this channel, if you've watched our videos, is that you'll be convinced time and again: just because a company pays dividends doesn't mean it can afford it. Cash flow is used for this. So, let's move on to the eight pillars tab.
Again, as with Align Technologies, all the marks are there except for the P/E and the price to free cash flow. Now look at this. Look at how different P/E and free cash flow pricing are. Since the P/E is lower, it means they are reporting higher earnings than free cash flow. And over a long period of time, they should be very similar.
This makes me stop and think: okay, let's check this out. And there are many reasons why this can happen. But look at this growth over the last 10 years. From 18 billion to 55 billion. Look at the revenue growth over the last two years. Net profit growth. 5.5 billion 10 years ago, 22 billion last year.
I mean, this is serious growth. So, the question you have to ask yourself is: is it worth it? Let's jump right into the stock analysis tool and start making assumptions. Again, great revenue growth over the last 10 years, and the world is evolving. The world is becoming more technologically advanced.
They will need more chips. So the question arises, what growth rate is a good one? This is the art of investing. I'd rather just sit there and say, "Hey, that's just how it is." But again, friends, if we knew the answers, investing would not exist, because its whole point is to find undervalued assets .
So you have to make your own assumptions. For example, regarding income growth: I will take 5, 8, and 11%. And I think 11% is very, very high. Profit margin. I'll choose 35, 36, and 37. You know what? Let's take 34, 36, and 38. Free cash flow margin. This is where I start to worry. I don't know why the free cash flow...
So one of the things I'm going to do in my research is figure out why their earnings and their free cash flow are so different. P/E 14, 16, 18 and, of course, my expected return of 12.5%. Click the analysis button. And, friends, briefly before looking at the results: this is why you watch this channel , because probably everything you see around you doesn't make sense.
For example, why are these stocks falling ? Remember, when you buy a stock, you are buying a share of the business. And what I always say on this channel: the more you know, the less you fear. It's scary to see a stock you love fall and think, "What's going on here? I love this company. Why is it falling?" Well, the great news is that as you learn, you gain a better understanding of why stocks rise and fall in the short and long term.
And you find a great company at a great price. You are calm if stocks fall. Recently, my friends were telling me, "Penn Gaming, Penn Gaming, Penn Gaming at 140, that's the best." I wrote to him when the price was around $30. I sold them. Come to your senses. If you loved Penn Gaming at 140 and revenue and profits were up, why would you sell just because the stock price fell?
He doesn't understand what makes stocks move up and down over long periods of time. In the short term, it's interesting to watch the process, but in the long term, we're here to buy good businesses at good prices. So , maybe you're looking at this and saying, "Yeah, but that's a lot of work." I know it's a lot of work, trust me.
But that's exactly why we created this channel. We aimed to create a community of people who are value investors, think alike, can come together, use tools and community. You see, here we have the EM community. Over 12,000 people have purchased this software since we launched a year and a half ago, and there is a very active group here doing research and doing things that help each other.
Because you know what, friends? It is impossible to know everything. But as you learn more from this channel and the community, your decisions will be based on very specific points, and there is a lot of research to be done about such companies . I just thought: someone here probably already has it.
So come on in, interact with them, that's why we created this. Registering is very easy in two ways. Everything.com or for our international users—patreon.com/everythingmoney . Come in and register now for less than a cup of coffee. You get this whole community, plus the software, all our tools: the eight pillars tool, the retirement calculator, the stock analyzer.
You can add all your stocks to the "eight pillars" portfolio. Exclusive video content. Every day, we publish videos only for the participants of this chat, and we conduct live broadcasts only for them. And the watchlist , you saw it in the first row of shares. I added it to my watchlist so I can work with it further.
And, of course, all the software that's coming soon. All of this is available to you for less than the price of a cup of coffee a day. But let 's get back to our stock analysis tool. I am opening our story. I open it again. And you know what? Here is our result. Here are our results. So, we are not far from the upper limit of the middle.
And if you like my optimistic assumptions, you're somewhere there. I would do more research. But I personally look at it and think, “Okay, it’s somewhere in the middle. Adding this to my watchlist at this price. And when it reaches that level, I will reassess the situation. And if necessary, and if I like what I see, I will conduct additional research." So remember: the more you know, the less you fear.
If you liked what you saw here, click here to watch our previous video from June 21st about Microsoft, Disney, and Intel and how much we paid for them after 52 weeks. Thank you very much.
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