3 notes
Longer work behind the calls.
PINSNYSEPinterest's 2024 net income exceeded its EBITDA, possible only with a positive tax line, in this case a $1.6bn deferred tax asset valuation allowance release. Stock-based compensation, which exceeds free cash flow in most years, flatters the cash flow statement separately. Both of the metrics investors would value PINS on are overstated, and ROIC still fails to clear WACC.
FTNTNASDAQFortinet has earned ROIC above WACC every year since 2017, by more than ten points since 2019, with top-decile margins and ten straight profitable years. The shares have de-rated since 2024 on decelerating service growth. The reverse DCF implies 19.61%, which the business has consistently exceeded.
APPNASDAQAppLovin earns an 80% ROIC against a 20% cost of capital, and at $692 the market is capitalizing that as permanent. A reverse DCF implies 34.17% sustained growth, above even the sell-side's bull case and above anything ad-tech has held through a cycle. Avoid it on price, not on quality.