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I have analyzed many of the recent stocks that world Buffett has been buying as of recent I looked at oxidal I looked at Siri and I have to admit this is by far my favorite company that war Buffett has recently purchased or I should say Berkshire has away it's a very good company high quality stuff wide mode you just can't come in and take away their business model it's like a toall bridge you could say you have to go in through this company and pay them their fee it's a beautiful business model I'm going to talk about it very quick video very quick overview give you my opinion on a business model fair value let you know if I believe is presenting an amazing opportunity at this price or maybe we're too late or maybe there's another alternative for the can of multiples that you're paying up for this amazing company because I always say it's not much about what you buy but it's also how much you're paying and even if you buy a good company or equality company if you pay too much for it you might end up losing money so I hope you enjoy this video and I hope you get some value out of it and brire hway has been buying a lot of the stock as of recent over $5 million 6 million stream very recently you know over the last few days he' been buying a lot of the stock and this stock is vrsn ver sign I believe this is how we pronounce it it hasn't done much it's up 2% over the last year it went up a little bit recently because you know Brook has always has been buying it over the last 5 years the stock is only up 2% hasn't even kept up with inflation so it's been a disaster hasn't really done anything it had a little bit of poor management and uh you know I'm going to talk about it and it's a very interesting business model and I didn't even know the company existed they mainly own over 69.6 million domain names and the domain names are the do com and znet domain names so they own the name doom and net so if you go on YouTube youtube.com they own the name.com you you go whatever net they own the name.
net this is amazing I even know the company existed this is genius and just think about it so if you want to go on whatever website godaddy.com or whatever you want to create a website whatever it is Doc you have to pay this company a fee to to get the do for your own website this is an amazing business model amazing I didn't even know the company existed so it's it's a genius it's a beautiful business model that's a good buy I me that's much better than Siri in my opinion I didn't like Siri too much that's a a very bright idea I I'm loving it guys I love the idea and I looked into it as a business model it couldn't be better it's it's an amazing it's like a tollbridge amazing business model over 169.74 10 largest you know domain names or whatever and is the largest at 156.000 million and the renewal rate is 72.2% now 72.2% is high but I was honestly expecting it to be a little bit higher I mean I was surprised that it wasn't a little bit higher I saw maybe it would be like 85 or 90% but it was 72.2% and uh you know that kind of surprised me a little bit I have to admit and you could see from here this is uh in terms of their charts domain names they went down 1.1 million quarter on quarter and they've been kind of going down uh over time and uh this is something you have to pay attention to and if you look at the growth of the company the growth of the company has been very slow revenue is only up 3.8% year on year operating income is only up 5.9% year on year so the revenue growth isn't really there and the main reason for that is the company has has to legally sign some kind of documents with uh you know I'm not an expert on it to be honest but there's some kind of an institution called the ntia and they have to sign some kind of contracts for Internet Security and stability and this contract kind of caps their prices of $10 per domain name per year and it would allow them to only increase prices 7% for four years out of the next 6 years so they can only increase prices around 7% for four out of 6 years so that would only leave them with so much in terms of price increases and the domain names you know they've been growing but the renewal rate is 74% isn't 85 or 90% And quarter on quarter sometimes they've been going down they haven't really been going up so that would leave the company without much growth and if I had to estimate the growth for the company I would not be betting on more than 7 % increase that they've been signing in those contracts so this is kind of why you know the stock has been flat over this period is because yes it's an amazing company high quality company in all those things wide mode you cannot come in and take their business but the gross isn't there that's just they have this business but they cannot go and acquire other companies I I don't believe they would it would be a monopoly they would have a hard time with the justice department and they can't do much besides buying stocks buying back stock and maybe doing dividends if they decide to do dividends but they've been buying back stock and uh you know just doing whatever and they can't really do much to grow the business they can't hike prices above 7% and you know they're stuck in a bad situation and that's just the way it is now looking at the way they were able to grow earnings per share because earnings per share has been growing a little bit faster if you look at you know revenue is 3.8% but earnings per share was 13.1% and and the company was mainly doing a few tricks and this are the tricks that uh you know McDonald's has been doing Pepsi's been doing at many different companies and they mainly borrow borrow a little bit of money to do a lot of BuyBacks to inflate earnings per share and this is not something out of the normal a lot of companies been doing it and you could look at 2023 they repurchased $900 Million worth of shares but free cash flow is only 800 million same thing in 2022 they borrowed a billion dollars or say they purchased a billion dollars and the free cash flow was only 800 million so they kind of did that and that's why earnings per share was at certain times you know 10 12 13% and revenue was like four or 5% and this is something to keep in mind but as I said the company is a amazing company Net Income margins this year were around 50% so 50% net income margin just amazing so for every dollar in Revenue 50 cents goes into the bottom line net income that's just an amazing amazing business model this is higher than Microsoft higher than Apple higher than inia higher than most companies you could even think of amazing stuff looking at the history of earnings per share it's been a little bit uh tough to predict I mean it goes from 7% at certain times when they borrowed to do a off BuyBacks and had certain things went to 13 16% this year was only 1% next year is expected to be 7% then 5% 7% based on the contracts that they signed that I showed you and it's been all over the place but if I had to bet on a fair number I would not be betting on more than the 7% we saw in the contract so I would bet on 7% average earnings per share grow over the long term so we're getting 7% on average earnings per share growth over the long term and we're getting around 50% at income margin with a very wide mode company no one's going to come in and take the do name or net or come up with some kind of a fancy dot whatever name that's going to take over a doom from YouTube or or apple.com or whatever it is and uh it's just a beautiful business model beautiful name and we're getting it for around pretty close to 25 times earnings 24.7 almost 25 times earnings the mean was 28.8 times earnings it went as high as 41 times earnings and as low as 18 times so what i is currently trading at right now at least on a historical average it's not too expensive it's not too expensive at all at least on a historical average so for me personally the way I would look at it for such an amazing business such a wide mode uh 7% or% grow average not too bad 50% at e margin one of the highest you could find in the stock market it's not too expensive it's not too bad and if I was not expecting like without a multiple expansion I would expect the total return over the long term to kind of mirror earnings per share growth so 7 to 8% per year kind of return over the long term and looking at buff it with the billions that he's managing I think this is something that he would expect you know 78 maybe 10% kind of you know return over the long term and it wouldn't be something that's too bad at all and this is again excluding a multiple expansion with a multiple expansion if the stock gets back to you know 30 32 times forget about it it's going to be much much more than 7 or 8% per year could be maybe 12 133% per year but for me personally if I was dying to own a quality company with a wide mod I would not be buying ver sign I always try to keep it real and I'm trying to do it again with this video I would not be buying ver sign for me if I was dying to buy a quality company and I was willing to pay up I'm just being honest I would be buying Visa this company is trading at almost 25 times earnings you could pay three more three points more and buy Visa at 28 times earnings Visa has as good as a business model as good of a mode in my opinion and even a superior mode for Visa than veros sign because Visa can at least somewhat control their own prices and if we have 10 or 15% inflation and ticket prices go up 10 or 15% you're going to have an automatic increase in 10 15% of revenues in Visa because the the fee stays the same but they collect 10 or 15% more in terms of the percentage of the fee from the transaction so it's such a beautiful business model you pay three three points more get Visa at 28 times earnings instead of getting 50% net income margin you get 56% net income margin and instead of getting a fluctuating 7% uh EPS per share growth you can get around 13 to 14% EPS per share growth or earnings per share growth I should say so for me personally if I was dying to buy a quality company I would be buying visa and I do own Visa I bought it at a much lower price I talked about it on YouTube but for veros sign it's not a bad buy I would be expecting 7 8% over the long term maybe with a multiple expansion maybe 10 11% on the high end it's not too bad it's better than Siri in my opinion I mean I I think it's a very safe investment it's hard to lose money over the long term with such a solid company high quality company but if I had to choose I would be buying Visa or I talked about CPS railroad stocks or something else I think there's better opportunities but that's just my opinion on warm Buffett's stock I hope you enjoyed it if you did please press the like button and maybe consider subscribing so I'll talk to you in another video
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