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hey everybody welcome back to everything money we're glad you joined us again as always i'm seth i'm here with paul and mo the sexy radio voice that i have paul people yearn for this voice when i'm on vacation they're they're very happy i'm back and uh i'll be going on vacation again in august and uh so where are you going utah what are you going to utah for yeah it doesn't matter yeah i i have been to utah in the past paul and i'm going back i really love it but today we're talking about the hell with all that today we're talking about serepta therapeutics serepta therapeutics is a biotechnical company biotech company focused on treating rare infectious other diseases now as you can probably see in my voice and here we have no damn clue what this company is but the key is this company has fallen very hard this year um and paul i'm always interested when companies are high flyers then they crash like this down something like 50 percent is now a time to buy this company what do they do we're going to use our eight people around for a long time do you see this yeah i thought we're going to use our apr analysis to see what's going on with this company are we interested in it because paul your your uh your girlfriend kathy wood of arc invest she loves this company and so let's see this this is from 1997.
go ahead i mean this is incredible look at that look at that it's all look at that look at this and all the while let's see it's so guys this is a five billion dollar company that has 573 million dollars in revenue and lost 700 million dollars last year so time to buy maybe so guys the thing is i immediately see this company and say the eight pillars aren't going to matter immediately and why because this is a very it even says at the bottom here most of serepta's product candidates are at an early stage of development so there's a lot of potential there now one thing i want to look at is how are they funding that development my guess is issuing a lot of shares and i was correct okay 10 years ago they had 22 million shares outstanding today they have 7 80 million shares outstanding oh my gosh they've almost quadrupled the number of shares outstanding let me explain to you how bad that is and my um and my friend kathy wood and how dumb she is for not understanding this let's say a company has 10 in profit and 10 shares outstanding okay each share gets a dollar of profit right yes but now there's four times as many shares paul now what they did was they're like oh we're gonna make it 40 shares that same ten dollars in profit now split 40 ways you get a quarter you get 25 cents you got diluted now is this bad um listen they're issuing shares here's my point when a company's issuing shares they're basically acknowledging our stock is overpriced so you want them issuing shares versus taking dead on correct yes i look at this saying this is a big let's go look at their revenue over the last so their revenue here let's go even further back oh my lord a hundred thousand nineteen ninety seven nine hundred thousand in two thousand two forty four million in 2012 574 great now there's obviously growth here in revenue big time look what happened here though oh my god look at this like to me guys i'm looking at going let's just i mean look let's look at their profit oh my lordy and the pride the the losses just keep tallying up and telling up and telling up what's their retained so normally people would argue this is a young growth stock but this company's been around a long while and they're still hemorrhaging money paul i mean they have three billion dollars in losses accumulated i mean listen guys free cash flow let's go to the let's just skip right the free cash flow okay negative 800 260 negative 560 negative 200 negative 250 negative 170 negative 165.
so does this mean you shouldn't buy the company no it's a they're making the argument of it's a growth company it's got a lot of potential so what we have is we have the stock analyzer tool so what i can do is i can put all my revenue on assumptions profit assumptions et cetera into the stock analyzer tool and say hey how does this company look in the future if it does hit its numbers the problem we have is look at the share change they're averaging the last 10 years they've increased the number of shares by 15 a year 15 per year they are diluting the heck out of every investor out there now i ask you all the time paul and maybe this is a moment where you can clarify for me it's like i don't get a piece of the income they're getting yes you do let me let me let me draw this analogy here there's something we need to make a separate video for please do so everybody always says yeah the free cash flow comes in but how do i get it let me give you an example let's say you have a company company a and let's assume it has zero debt and just a bank account and every year it makes ten dollars in free cash flow after year one how much is in the bank account ten you're two how much in the bank account it's 20.
you're three how much in the bank account thirty you're four forty and you're five fifty bucks this is the math i can do paul this is good right so at the end of year five it's still making ten dollars a year and it has fifty dollars in cash in its account and no debt so you can essentially sit there and say well they might just give a one-time dividend and say hey we have all this cash we're gonna give it to everybody or they might you guys sit there and say as an investor wait i can buy a company that's making how much would you pay for a company that makes ten dollars every single year and it has fifty dollars in bank account today how much do you pay for it 100 i'd be like well wait a second if i pay 100 i'm getting it's backed by fifty dollars in the bank account tomorrow mm-hmm and eventually they gotta do something with the cash what are they gonna do with the cash issue a one-time dividend buy back shares buy a new company with it buy another company increase its revenue increase its profit you get it in some it's going to either increase the cash flow the company which you want or it's going to be issued to you as a dividend or they're going to buy so many shares back that eventually there's a very few owners and you're getting a bigger and bigger piece of the company stop looking at a stock as just this ticker symbol that keeps going up and down i don't get that cash flow yes but if you invested in my company you invest in everything money and we had a bank account and just kept growing and growing growing and you knew you had rights that bank account what's the difference there's no difference you might sit there and say yeah but i don't get that i can't decide what i'm doing with it put your ego aside it's not about that it's about sitting there and finding companies that people can sit there the company you believe the company heads can invest the money at higher rates of return and do better with the cash if you don't believe that don't buy the company but you'll eventually see this cash in some way because guess what there'll be pressure from people on the investors to sit there and do something with 30 hey what are you guys doing with that cash give it to us then let us have our money because if i paid let's say i paid 100 to the stock in year one i can now get fifty dollars with that back in year five isn't that pretty awesome that's how you get your money back with a company like serepta i would say i didn't know the name where they come in like this it's just accumulating loss after loss after loss does that mean it's not going to gain and that can be worth something no but at some point you have to see some sort of turnaround but it keeps losing more and more money every single year wouldn't you imagine mo that normal people like myself maybe some of you viewing would just see well it used to be this high it's now really low so i should probably just buy this paul because it's going to go back up right don't they all just go up mostly but it's farmer though you have to understand the pipeline too and if you start digging into this it's duchenne's muscular dystrophy so there's no cure for it there there they have drugs that probably what they're generating revenue from is their three drugs that are commercial they're generating their treatments for it but it's not like duchenne's is really it's a tough area to be in and that's where they are so i'm staying away from it i can see the trading chart behind you it's well below your 32 stochastic so really to me i wouldn't even trade something like this but what i want to teach you about is this right here this this massive drop one day this happened after market hours and just fell and just opened down here so this is called a breakaway pattern what a breakaway pattern is is you have a big fall like this and a huge gap and then you have this is all just resistance that is just pushing down on you so the people that were up here they're saying if i can get 50 of my money back i'm going to exit the position so the stock price will come up a little bit and then it'll fall back down and then it'll just keep falling down and eventually this is going to get to the point where the stock price comes up and it comes back down it comes up and it comes back down and it just can't get through that halfway because these people back here are saying just give me give me half my money back and i'm gone so that's the real problem with these breakaway patterns it takes a very long time and the space that they're in is very expensive to research and frankly it's it's it's like alzheimer's it's like the biogen we just did there's not something out there that's concrete to that's a very effective treatment slash cure unfortunately so that it just is what it is paul do you want to do the um the stock analyzer tool on this yep so here's what i want to show people remember guys look at this income statement they are losing money every single year they lose more and more money the stock analyzer tool has not allowed me to do that it is assuming it starts making money today so we can all agree that's a little aggressive because they're already on the path of losing money like crazy right here yeah every single year and it's getting worse and worse and worse as the years go on okay the stock analyzer tool is assuming revenue growth between 20 and 40 a year for the next seven years okay so let's do 40 a year 1.4 to the power of seven times 550 million they did last year it makes them a 5.8 billion revenue company in 10 years in seven years okay buying back shares they're issuing 10 percent and keeping i'm assuming they keep the same in the best situation all these assumptions are here assuming profit happens today look at it there's only one area the highest assumptions where it's a great deal if you can assume these things but i don't think any of these assumptions are reasonable that's the problem so i look at this saying is it possible this is a great value right now sure it's possible is it probable i don't know if you're excited by fast growth opportunities you still have to fundamentally understand the company and how they're going to get those fast growing opportunities they're still diluting the heck out of every single owner out there in the last 10 years they've quadrupled the number of shares they have outstanding so i'm making an assumption over seven years that they don't issue any more shares over the next seven years that's quite the assumption when the last seven years they've done how much right i just look at going geez oh pete is it possible ends up being a home run yes is it probable your job in investing is like is this is your statistician are the odds in my favor better than odds against me that is the point that's it kathy would say why she's interested in this or why she bought a lot of this does anybody know i just want to know what's what is the absurd rationale that this woman thinks you know it's funny people like her make fun of value investing and use value investing to justify so kathy is it i.e kathy wood serapta sorepta yeah there it is sorry let's see what her comments are are there any comments it's just crazy to me that they're hedging everything on like to me this goes back to like was that clover or something yes or the the other bi ngo or something we did yes biogen biogenomics it's the same thing and everybody got so mad about that one but this like i like what the company's doing as far as what the disease they're researching but god be realistic spread yourself out a little bit like you're going after one extremely difficult area to treat and the the big companies struggle to do this let alone something like this what do you find in paul i'm not seeing any comments from her it is funny how we'll look at a stock that maybe michael bury buys and you look at the balance sheet you find this anomaly it's like oh this is why he did it yeah but with her it's just kind of you never find it all the way that's the thing about hype it's just her business is all about hype her etf is all about hype 17 of her top 20 holdings lose money i mean guys the when you're paying tens of billions of dollars to own money losing ventures it's just it doesn't take many for them to fail for you to end up having a really hard time really really hard time yeah and the folks the reason we we bust up kathy wood is because we we catch you as a viewer after you watch all those other videos and lose money then they come to us and finally say oh this speaks to us so if this speaks to you the the numbers the math uh the discipline of looking at the actual financial data behind a ticker symbol you can join our patreon below over 4 000 members paul it's incredible and uh you get access to the software you get access to the three of us you get um we did not paul can we oh please do look at the software guys it started at eight and i'm a big believer in building value it's going to 49.
so get in now you're locked into the price you buy for you get the mobile app eight pillars 30 years of financial data stock analyzer tool daily content exclusive to you not on youtube access to us real estate calculator stock screener retirement calculator the discord community 4 000 people like you talking all over the world new zealand so many can you talk about everything you talk about crypto in there like of course so anyway 200 a month 200 a month 35 a month are just 25.
you get all of these you don't get any of those questions what are you doing you have interviews 80 cents a day if you if you're wondering you can look at our patreon account versus subscriber count and it's astronomical compared to other people it's because we provide so much value to our patrons and you know we love you so that's our take on surrepta therapeutics obviously a huge avoid on our part as value investors but we'll keep you updated if this thing falls uh even more i'm guessing with this zero free cash flow over the past 10 years one year of free cash flow will probably not be buying this company anytime soon pass listen i i just don't see the story to it i mean i bought ccl they've had lack of free cash from the last year and i just look at it saying guys you have to have a story i have a reasonable story as to why the company will start making money suddenly i look at this going boy it's been around for 20 some years they've never made it i mean they've barely made a profit they have a total loss over the last 20.
it's just the hard thing to do it's just hard for me to get my head around that and of course paul when i when i go to youtube and type in i just typed in this stock and of course this stock can explode this is a um here's another one uh this is nine months ago uh biotech analyst discusses her top picks everyone's saying hey here we go huge farm this is six months ago there's not a single video that says wait a minute here uh maybe we should pump the brakes they're all just yeah why are they hyping though they're hyping because they need to sell views this stock will go crazy we are we we have eight nine businesses upstairs we do this because we enjoy this we tell you executive believe not what you want to hear is that you buy stuff from us do we have software absolutely does everybody who buys a software agree with us and everything absolutely not but our goal is to sit here and provide financial learning financial teaching so you can make a decision based on fundamentals and how you approach it but there are many ways to skin the cat even in value investing i'm just showing my way but hopefully opens your eyes to other ways of value but serapto is not a value play in my opinion that's our take follow the thumbs up and i will see you next video thanks for watching bye
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