#48 World's best stocks - Ep.2
Introducing three new high quality companies
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Welcome to episode 2 of the “World’s best stocks”. Let’s continue to search for the best stocks in the world. As for the first episode, I used the Finchat (Affiliate Link) screener with the following filters:
ROIC 10Y Average >= 15%
Revenue 10Y CAGR >=10%
Diluted EPS before extra items 10Y CAGR >= 10%
Net Debt/EBITDA =<3
EPS Forward 2Y CAGR >=10%
These filters are very though and I think if a company meets these it is really high quality.
#1 Intuitive Surgical (NasdaqGS-ISRG)
ROIC 10Y Average = 21.22%
Revenue 10Y CAGR = 14.06%
Diluted EPS before extra items 10Y CAGR = 15.71%
Net Debt/EBITDA = -1.99
EPS Forward 2Y CAGR = 15.84%
Market Cap = $171.3 billion
Total Return last 10Y = 831%
Forward P/E = 68.59
Intuitive Surgical ISRG 0.00%↑ is an American corporation that specializes in the development and production of robotic-assisted surgical systems. The company is best known for its da Vinci Surgical System, a groundbreaking platform that enables surgeons to perform minimally invasive surgeries with enhanced precision, flexibility, and control. Founded in 1995 and headquartered in Sunnyvale, California, Intuitive Surgical has revolutionized the field of surgery by combining advanced robotics, imaging, and artificial intelligence.
The da Vinci system consists of a surgeon's console, a patient-side cart with robotic arms, and a high-definition 3D vision system. This setup allows surgeons to operate with greater accuracy through small incisions, which can lead to reduced recovery times and fewer complications for patients. Intuitive Surgical's technology is used in a wide range of procedures, including urology, gynecology, cardiothoracic surgery, and general surgery.
Intuitive Surgical has grown to become a leader in the field of robotic surgery, with its systems used in hospitals and medical centers around the world. The company continues to innovate by developing new instruments and expanding the capabilities of its robotic platforms, making it a significant player in the healthcare industry.
First thoughts
The healthcare industry is home to many outstanding companies, and Intuitive Surgical is undoubtedly one of the most impressive. The company boasts a strong balance sheet, with exceptional margins and returns. Its total return of over 800% in the last 10 years speaks volumes about its performance. However, there are two concerns I have regarding its future prospects.
First and foremost is the high valuation. With a forward P/E ratio of 69, while the company is expected to grow its EPS by around 15% per year, this valuation seems quite steep to me. The second concern is the uncertainty surrounding the company’s future growth prospects. While Intuitive Surgical has a stellar track record and has delivered robust revenue growth in the past, it’s challenging to gauge how the market for surgical robotics will evolve. The current high valuation suggests that the market is pricing in relatively high EPS and revenue growth over the long term, which may be difficult to sustain.
#2 Arista Networks (NYSE-ANET)
ROIC 10Y Average = 55.1%
Revenue 10Y CAGR = 29.62%
Diluted EPS before extra items 10Y CAGR = 41.17%
Net Debt/EBITDA = -2.34
EPS Forward 2Y CAGR = 16.24%
Market Cap = $110.6 billion
Total Return last 10Y = 1,724%
Forward P/E = 40.15
Arista Networks ANET 0.00%↑ is an American technology company that specializes in providing high-performance networking solutions for large data centers, cloud computing environments, and enterprise networks. Founded in 2004 by Andy Bechtolsheim, David Cheriton, and Kenneth Duda, the company is headquartered in Santa Clara, California. Arista is known for its innovative software-driven approach to networking, with a particular focus on cloud-scale infrastructure.
Arista's core product offerings include a range of network switches and routers that run on its proprietary Extensible Operating System (EOS). EOS is highly regarded for its programmability, scalability, and reliability, enabling organizations to manage complex and large-scale networks with ease. Arista's solutions are widely used by cloud service providers, large enterprises, and telecommunications companies to support their data-intensive operations.
The company has seen rapid growth due to the increasing demand for cloud services, big data analytics, and modern networking needs. Arista Networks has also been recognized for its focus on innovation, particularly in the areas of software-defined networking (SDN) and automation, which have set it apart from traditional networking vendors. As a result, Arista has become a major player in the networking industry, competing with established companies like Cisco.
First thoughts
Arista Networks has significantly benefited from the growth of cloud computing and is now also capitalizing on the rising infrastructure investments for AI applications. The company's financial performance is undeniably strong, with impressive numbers across the board. While I don’t fully grasp the intricacies of their products and solutions, it’s clear that the demand for cloud and AI infrastructure is massive and expected to remain robust in the coming years, which bodes well for future growth.
However, like many high-quality companies, valuation is a concern, with a current forward P/E of 40. That said, the 2027 forward P/E of 23.3 is much more appealing, making this an interesting option for long-term investors. If you have a long-term investment horizon, Arista Networks could be a compelling stock to consider.
#3 Copart (NasdaqGS-CPRT)
ROIC 10Y Average = 28.66%
Revenue 10Y CAGR = 13.84%
Diluted EPS before extra items 10Y CAGR = 24.38%
Net Debt/EBITDA = -1.67
EPS Forward 2Y CAGR =13.76%
Market Cap = $49.6 billion
Total Return last 10Y = 1,132%
Forward P/E = 32.94
Copart, Inc. CPRT 0.00%↑ is an American company that provides online vehicle auction and remarketing services. Founded in 1982 by Willis J. Johnson and headquartered in Dallas, Texas, Copart operates one of the world’s largest networks for selling used, wholesale, and salvage vehicles. The company’s innovative business model leverages technology to connect sellers, such as insurance companies, banks, car dealerships, fleet operators, and rental car companies, with a global network of buyers, including dismantlers, rebuilders, and individual consumers.
Copart is best known for its proprietary online auction platform, which allows buyers to bid on vehicles remotely. This platform has revolutionized the vehicle remarketing industry by offering a more efficient, transparent, and accessible way to buy and sell vehicles. The company handles a wide range of vehicles, including cars, trucks, motorcycles, boats, and even heavy machinery. Many of the vehicles auctioned by Copart are salvage vehicles, which have been damaged but can be repaired, parted out, or recycled.
Copart has expanded its operations internationally, with locations in countries such as the United Kingdom, Germany, Brazil, Canada, and the United Arab Emirates. The company has consistently demonstrated strong financial performance, driven by the growth of its online platform and the increasing demand for used and salvage vehicles. With its global reach and technological edge, Copart continues to be a leader in the vehicle remarketing industry.
First thoughts
Before seeing Copart in the screener results and adding it to today’s list, I assumed it was just another auto dealer. However, once I discovered the true nature of its business model, I was genuinely surprised and thought, “Wow, that’s really impressive.” The forward P/E ratio for 2024 is around 32, which seems high. I’m not yet sure if it’s excessively overvalued or just slightly above fair value. I plan to explore this stock more deeply at some point, but for now, the other two companies on today’s list seem more promising to me.
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Disclaimer: The information provided in this publication is for educational and informational purposes only and does not constitute financial advice. The content is solely reflective of my personal views and opinions based on my research and is not intended to be used as a basis for investment decisions. While every effort is made to ensure that the information is accurate and up-to-date, the writer makes no representations as to the accuracy, completeness, suitability, or validity of any information in this post and will not be liable for any errors, omissions, or delays in this information or any losses, injuries, or damages arising from its display or use. All readers are advised to conduct their own independent research or consult a professional financial advisor before making any investment decisions. The author is not invested in the mentioned stocks.
Great post!