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Bill Aman just made one of the biggest bets ever. In one quarter, he invested over $2.2 billion in Uber, making it his largest position at 18.5% of his portfolio. He now owns almost 1.5% of the entire company. and he posted on X. We believe that Uber is one of the best managed and highest quality businesses in the world.
Remarkably, it can still be purchased at a massive discount to its intrinsic value. So today we are going to go through our sevenstep analysis process to understand why Aman made such a huge commitment to Uber. What does he see that makes this right sharing giant worth nearly a fifth of his portfolio?
And should we be following his lead? Oh, and stick around till the end because I will be revealing some hidden value in this company. But before we do that, I wanted to thank Forecaster for sponsoring this video and we will be using their website throughout this analysis. Uber Technologies is best known for its ride sharing platform which connects drivers with passengers through a mobile app.
But Uber has expanded far beyond just rides. They now operate food delivery through Uber Eats, freight transport and other logistics solutions. When we go to forecaster and look at the fundamentals of Uber, we see that mobility makes up 48% of their revenue while delivery accounts for over 40%. So they have two very strong pillars supporting the business.
Okay, let's dive into the analysis. If you invested $1,000 in Uber at the IPO today, the investment would be worth something close to $27. And that is a gain of 100% since 2019. That's actually pretty impressive considering the company went through the pandemic shortly after going public when ride sharing demand plummeted.
So, let's see who's been along for this ride. Individual insiders, that is an X. Only 0.2% of the company is owned by individual insiders. And we would like to see this number over 2%. So, the management doesn't have much skin in the game, which is typical for a company of this size. And are individual insiders buying?
That is an X. We actually see sale transactions almost every quarter from insiders. And the super investors own this company that is a check with eight super investors including great names such as Bill Aman, David Ter, and Thomas Russo. And are they buying right now? That is a massive check. Last quarter, Super Investors bought 33 and a half million shares and sold only two and a half million shares.
That's over 31 million shares of net buying. And of course, the main driver of this movement is Bill Aman. So, super investors are piling into Uber in a big way. That's probably something we shouldn't ignore if we are looking for investment opportunities. Okay, let's look at the fundamentals. Return on invested capital that is an X at minus 7.1%.
So that's disappointing but remember Uber was unprofitable for many years as they invested heavily in growth. If we look at the last two years, the return on invested capital is actually positive. And what do we know about net profit margin? It is an X averaging minus3% over the last 5 years. But that's not the whole story.
Currently, they have a 27% margin and have the highest margin in the industry. Second place goes to Lyft with just 0.9%. So Uber has dramatically turned around their profitability and now dominates their competitors. And let's take a look at share buyback. It is an X. They issued an extra 70% of shares since going public.
That's significant dilution for shareholders. And the debt, it is a check. It would take just over one year to pay the long-term debt with a current free cash flow. And we want to see it under two years. So despite the other issues, Uber has a surprisingly low debt for a company that burned cash for so many years.
It seems that issuing shares was the main way of getting capital. So now that they are profitable there is a chance that they will slow down this process. The financial health looks mixed when we look at historical numbers but the recent profitability transformation is very impressive revenue growth that is a check at 27.6% 6% compound annual growth rate since IPO and we would like to see this number higher than 10%.
So that's an exceptional growth. Free cash flow growth that is a check at 160%. Now that's just incredible. But there is a catch. The result is only for the last 3 years. We can't calculate this growth in a longer time frame because the company was losing money. If we open forecaster and go to row data, we see that the first positive free cash flow was in 2022.
If we look at income statement and go all the way down here to earnings per share, we see that they were profitable from 2023. So the earnings per share growth is a track at 128% but only for the last two years. So even though these results look amazing, we have to remember that they are shortterm results.
But it does not change the fact that Uber has transformed from a cash burning startup to a highly profitable cash generating machine. Uber does not currently pay any dividends. Considering they've only recently became profitable and are still growing rapidly, this makes perfect sense. They are better off reinvesting the cash into growth opportunities rather than paying dividends.
Price to earnings ratio is 14.3. That's actually quite reasonable for a high growth tech company. The S&P 500 average is around 28.7. So Uber is trading at about half the market multiple. Now let's calculate the intrinsic value using a discounted cash flow analysis. So in the low scenario we will estimate a growth of 11% for the first 5 years and then 10%.
In the medium scenario 14% and then 13% and in the high scenario 16% and then 15% growth. The low scenario is rather conservative. It is below the growth that the analysts predict for Uber. Medium matches management and analysts predictions. And the high scenario assumes Uber can really maintain its momentum, especially when self-driving vehicles potentially may transform the industry and make it even more profitable.
And before we will look at the results, let's go to forecaster and see what valuations of Uber we can find over there. So we don't get the discounted cash flow analysis or the economic value added because this company only recently became profitable. But we do get Peter Lynch valuation and it is around $88 which means that according to forecaster Uber is currently fairly valued.
Well, let's complete our calculations to compare them. So with our estimates, the intrinsic value in the low scenario is $85, in the medium $16, and in the high scenario $123. Now we apply our 30% margin of safety and we get in the low scenario $59 in the medium $74 and in the high one $86 and the current price is around $83.
So only the medium and low scenario with the margin of safety is in the red. I have to agree with forecaster on this. Uber appears fairly valued right now. Uber has transformed recently into a profitable company with strong growth potential both in ride sharing and delivery. It seems fairly valued, especially for a dominant player in the industry, and it has surprisingly low debt, unusual for a company that was burning cash for many years.
My main concerns are connected with share dilution and the fact that it is a fairly new company, so we don't have a history of stable growth. And that means the risk seems higher. But then again because investors know that the price reflects this risk. Let's go to forecaster to get a better understanding of this situation.
If we go to transcripts and use the AI earnings call highlights, we can see a number of positive news like launching of Whimo in Austin, new partnership and acquisitions, strong growth across mobility and delivery, 14% growth of active monthly consumers, and continuous expansion into less dense markets.
We also don't see any negative news from the management when it comes to future outlook. They expect strong growth. They want to focus on expanding into new markets and expect to develop new partnerships when it comes to self-driving cars. So, it all seems very nice, maybe even too nice. Let's open forecasters AI agent to look at the risks especially long-term risks.
So we find here things like the fact that autonomous technology is very capital inensive. Uber also has to take into account labor laws frameworks especially in Europe and of course geopolitical tensions. Now, if you would like to check out Forecaster for yourself, because there is much more you can do on this website, then you can use my affiliate link in the description and you will get a free trial and also a 10% discount if at the checkout you will use a code bold 10.
So, thank you Forecaster for sponsoring this video. And like I mentioned at the beginning, there is also some hidden value here. Uber has accumulated $33 billion in losses over its history, but these losses have created massive tax benefits worth billions of dollars. And now that Uber has achieved profitability, it can use these benefits to skyrocket its earnings.
So it has created a substantial hidden asset that right now is becoming visible and valuable as the company transitions to sustained profitability. The downside is that when they use all of their tax benefits, it will show in the earnings. You can read more about it in the Heindi group analysis of Uber.
And if you know more about this situation, then definitely let me know in the comments. I think we can see why Bill Aman is so bullish on Uber. This company has achieved profitability while maintaining strong growth. It dominates its market with the highest margins in the industry and has multiple revenue streams between mobility and delivery.
The company is basically firing on all cylinders and at a PE of just 14.3. It's actually cheaper than many slower growing companies. Also, the self-driving robo taxis may create an even more exciting future. So, is Bill Aman right? Well, only time will tell. If you like this video, then definitely check out my analysis of BYD.
It is another very interesting company. Thanks for watching and see you in the next
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