* Caterpillar sales have increased phenomenally, from $39.0B in 2020, to $48.1B in 2021, to $56.5B in 2022.
** Profit per common share of CAT has increased from $5.51 in 2020, to $11.93 in 2021, to $12.72 in 2022.
Market Valuation: $32 Billion
Ironbound Buy-Side Valuation: $40 Billion
Ironbound Assessment: Deerfield Illinois based Walgreens Boots Alliance, Inc., founded in 1901, is the largest retail pharmacy, health and daily living destination in the United States and Europe with over 13,000 locations across 9 countries. Approximately 78% of the American population lives within 5 miles from a Walgreens or Duane Reade retail pharmacy location. In 2022, the company filled 820 million prescriptions, and now has over 102 million myWalgreens rewards loyalty members. Our upside valuation of $50 Billion is on the higher end to account for the Company’s transformational cost management program estimated to unlock an additional $3.5 Billion in annual cost savings after 2024. We like Walgreens because of its meaningful holistic business purpose: to help people lead more joyful lives through better health. In 2022, the company received numerous inclusivity awards that included, a score of 100 from the Human Rights Campaign’s Corporate Equality index, a bronze award on the Stonewall Top Global Employers Index for LGBTQ+ inclusions, and 100% on the Disability Index for disability inclusions. The company is rolling out local clinical services at a lower cost to consumers inside pharmacy locations as a long-term healthcare value creation strategy.
Why Best Buy is a Great Company
Market Valuation: $19 Billion
Ironbound Buy-Side Valuation: $15 Billion
Ironbound Assessment: Minnesota based Best Buy Co., Inc., founded in 1966, is an American multinational consumer electronic retail chain. Over the last 5 years the company has delivered over 10% return-on-assets, and over the last 10 years averaged 11% operating income as a percentage of assets. As a result, our upside valuation is on the higher end at $25 Billion, equivalent to 10-times the average operating income reported over the most recent three years. We like Best Buy because it reports a mission driven triple-bottom-linebusiness model in their 10K SEC filings. In addition, the company boasts a clear north-star purpose: to enrich lives through technology. Moreover, the company is determined to lead with a positive impact on society and the environment. In 2022, Best Buy reported a 2030 goal to reduce carbon emissions by 75% and become carbon neutral by 2040. Their environmental initiatives also include a 25% reduction in water consumption by 2025 with waste reductions from single-use-plastics as well as a transition to more sustainable alternatives. As part of their long-term growth strategy, Best Buy has been making inroads into health technology to expand their health and fitness related products and services. These stakeholder growth strategies should help revenues double to $100 Billion over the coming decade.
165 Years of Macy’s Success
Image: Macy's NYC Flagship Store
Market Valuation: $6 Billion
Ironbound Buy-Side Valuation: $10 Billion
Ironbound Assessment: Manhattan NY based Macy’s Inc., founded in 1858, is an American omnichannel higher-end retailer with almost 800 locations. Our upside valuation is $17 Billion, equivalent to either 4-times the operating income or the fiscal 2021 value of all assets. We like Macy’s and believe the secret behind the company’s 165 years of success is rooted in their team culture, which levels-up colleagues with education and career growth. Furthermore, there is a strong emphasis in the 10K SEC filings on workplace values of acceptance, respect, integrity, and giving back. Looking ahead, Macy’s is making a major post-Covid Polaris growth strategy – designed to better attract Millennials. The Polaris strategy involves modernizing existing technologies to combine the instore and digital experiences with more branded products that better appeal to the new and younger demographic.
Wall Street Loves Costco Too
Market Valuation: $215 Billion
Ironbound Buy-Side Valuation: $205 Billion
Ironbound Assessment: Seattle Washington based Costco, founded in 1983, is an American multinational corporation that operates membership-only retail warehouses and e-commerce websites. Our upside valuation is $300 Billion or 1.5-times the $200 Billion in average sales reported between 2020 and 2022. We believe Costco’s true competitive advantage is rooted in their code of ethics: management must “Take Care of Our Employees” so that employees reciprocate and “Take Care of Our Members.” Combining this simple rule with their effective strategy of only selling high-quality merchandise at the lowest possible price, has made Costco the most productive in the retail industry. Their superb and efficient service has created some of the most loyal customers, churning year-over-year double-digit sales growth. As a result, Costco is forecasted to reach $1 Trillion in sales by their 50th birthday in 2033.
The Biggest Biotech Deal of 2022
Market Valuation: $14 Billion
Ironbound Buy-Side Valuation: $22 Billion
Ironbound Assessment: Ireland based Horizon Therapeutics Public Limited Company, founded in 2005, is a leading high-growth biotech company focused on innovative medicines for rare autoimmune severe inflammatory diseases. Our upside buyout valuation is $22 Billion or 20-times the average sales reportedbetween 2019-2021 and continued double digit sales growth for the foreseeable future. At this valuation, roughly 70% of the acquisition value is Goodwill for the rights to develop and produce TEPEZZA®, their blockbuster thyroid eye disease (TED) medicine. TED is about four-times more prevalent in women than men, affecting roughly 24,000 women in the United States. TEPEZZA® promises a phenomenal growth opportunity; upon FDA approval in 2020 initial sales jumped over 100% from $820 Billion to over $1.6 Billion and accounted for over half of sales in 2021. The $28.3 Billion acquisition by Amgen will further expand thier portfolio of breakaway potential drugs and immediately increase future sales projections by an additional 10% annually – pushing its own $140 Billion valuation even higher.
The Secret behind AMZN Success
Market Valuation: $1 Trillion
Ironbound Buy-Side Valuation: $800 Billion
Ironbound Assessment: Seattle based Amzon.com Inc., founded in 1994, is an American multinational e-commerce technology company. Our upside valuation is $3 Trillion or 10-times the $300 Billion in average sales between 2019 and 2021. We like Amazon and believe the secret to the stock’s success is clearly defined in the first line of their 10K SEC filings: “We seek to be Earth’s most customer-centric company.” Followed immediately by their four guiding principles: “customer obsession rather than competitor focus, passion for invention, commitment to operational excellence, and long-term thinking.” Companies with that level of focus guarantee stakeholders’ long-term success. Unlike comparable e-commerce retailers, Amazon Web Services (AWS) generates the biggest untapped blue ocean opportunity. In 2021 e-commerce reported 47% of sales, $222 Billion, all the while AWS accounted for over half of the consolidated $33 Billion in profits from only $62 Billion in AWS sales. Overall revenue is forecasted to more than triple and surpass $1 trillion within the next five years.
Market Valuation: $1.2 Trillion
Ironbound Buy-Side Valuation: $700 Billion
Ironbound Assessment: California based Alphabet Inc., parent company of Google founded in 1998, is an American multinational technology company. In 2021 the company reported $257 Billion in sales and $76 Billion in profits. Our upside valuation is $2 Trillion based on the average of $200 Billion in sales over the past three years and growth continuing to exceed 10% annually. This is a reasonable expectation considering Google is at the heart of the digital economy, which continues to grow as the world rapidly shifts further online. Much of this accelerated growth can be attributed to aligning stakeholders’ together. In 2007, Google was the first major company to be carbon neutral in their operations, by 2020 they were the first major company to be carbon neutral for its entire history. Their 2030 goal is to be the first major company that runs on carbon free energy in perpetuity, and help other organizations follow in their footsteps. The biggest hurdle holding back the stock price is the 51.4% voting control by the two co-founders. The limited control prevents a sovereign wealth fund or group from acquiring the company. The current market valuation is trading at 21-times the average operating income, much higher than 14-times multiple favorable for a value driven buyer.
Market Valuation: $16 Billion
Ironbound Buy-Side Valuation: $40 Billion
Market Valuation: $25 Billion
Ironbound Buy-Side Valuation: $23 Billion
Ironbound Assessment: Seattle based Seagen Inc, founded in 1997, is a leading American biotechnology company that develops and commercializes targeted cancer therapies. Our buyout valuation fairly prices the company between $15 to $32 Billion, or approximately 10-to 20-times sales. The lofty valuation is 90% Goodwill for the rights to develop and produce TUKYSA® - a lifesaving treatment for metastatic HER-2 positive breast cancers. TUKYSA® promises a phenomenal growth opportunity; upon FDA approval in 2020 initial sales started at $120 million and skyrocketed the following year to $334 million. Merck shareholders are extremely optimistic outbidding by 25 percent our highest estimated valuation range. The $40 Billion acquisition would strategically entrench Merck further into the oncology space alongside their blockbuster Keytruda®. Indeed, Merck has greater scale capabilities to commercialize the acquisition and achieve a profitable return on investment faster than Seagen could on their own.
We are strategy consultants helping Sovereign Wealth Funds optimize investment strategies that leverage stakeholder values.
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