what happened to shopify today

shopify is an incredible service it's,awesome an incredible company everybody,i know who uses it loves it it couldn't,be better for e-commerce the question is,does that mean it's a good investment,not necessarily our job here is to,separate company from stock that is a,big deal what usually happens out there,is people think great company therefore,i must own the stock and it's completely,misguided so i'm going to go through our,eight pillar process look at shopify and,see what we should pay for by end of the,video using our famous stock analyzer,tool if you already belong to our,software please follow along go log in,if you don't and you love the software,at the end check out everythingmoney.com,it's less than a cup of coffee per day,and it'll change your life so,let's go to shopify very easy ticker,symbol shop it's currently at 33 a share,guys,in the last year,it hit a high of 177.,and i'm quite sure if you look at our,past videos when it was up here we,probably gave some ridiculously low,price everybody probably thought there's,no way it would fall guys this was,december and it's down 80,since december,these things happen,stocks never stay up forever of the over,price that's just the way it is so let's,go analyze,first pillar well first off the stock is,a 42 billion dollar company market cap,wise all the shares multiplied by 33 per,share total number one we want the,five-year p e ratio to be under 22.5,it is currently 135. that's the next so,even after falling 80 percent the,five-year pe is still really high the,one-year pe is still 230 that's insane,pillar number two,we want the five-year return on invested,capital greater than nine percent,main page of our our software five-year,return invested capital one point two,percent that is an x as well so guys so,far we have two x's now number three,very simple we just want revenue growth,over the last five years so we scroll to,the top go to the income statement and,five years ago revenue was 200 760,million last year 4.8 billion massive,growth but again you can overpay for,growth for those who don't believe me go,look back at the 2000 era how many,companies today that still stuck around,have grown two three four times and,their stock are still selling for less,than it did 27 years ago,pillar number four we want net income,growth over the last five years just one,dollar or more so we scrolled down on,net income they lost 42 million five,years ago last year they made 180,million check mark there,all right so it's getting better,pillar number five the silent killer of,investing this is something you'll never,hear on any other channel in fact other,channels will claim this is a good thing,spoiler alert it's not share is,outstanding we don't want the company,diluting us owners by issuing more and,more shares to others to give you the,example if a company has 10 shares,outstanding and you own one you own 10,of the business,but if they issue two more shares,you still own one share but now out of,12 shares so you're down to 8.33 of the,company you have been diluted this is,very different than stock split you have,been diluted that is not a good thing so,we scroll down to the bottom of the,income statement we go to the end of the,sixth year which was one two three four,902 million shares and now they have,1.26 billion that's an x they've diluted,everybody by the extra 33 percent,that's crazy,pillar number five has to do with,long-term liabilities so we go back to,the main page of our software and we,look at the five-year average free cash,flow labeled right here,so my goal is to buy a company that has,long-term liabilities less than five,times their five-year free cash flow so,the five year free cash flow is 145,multiplied by five that's roughly 740,let's call it 725 million dollars now,guys this is a lot of math for you don't,worry there's a shortcut to all this in,our software just stick around a little,bit longer and i'll show you where it's,at,so 725 million so we go to the balance,sheet where all liabilities are labeled,we scroll all the way to the bottom and,right here long-term liabilities,1.36 billion that's almost double the,one we want now this is a fast-growing,company that could have a very,depressed cash flow over the last five,years because they keep growing so it's,not as big a concern for me especially,with 4.7 billion dollars in revenue so,i'm not as concerned about this one,pillars seven and eight,have to do with the free cash flow the,business,so your first question is i've heard,free cash flow what is it it is cash,from operations less your capital,expenditures and a company can do one of,five things with that they can buy back,shares pay dividends pay down debt,reinvest back in themselves and make,acquisitions they can do all five none,of them any combination they want,so we go to the cash flow statement to,understand this and your uncle paul,because he loves you so dearly,makes the math easy for you by adding,this in here,so cash from operations that's your,capital expenditures they lost 30,million in free cash flow five years ago,they made 250 last year that's a check,mark and our final metric,is the price the free cash flow we want,under 22.5,just like the pe we 120.5 we want the,same thing for price of free cash flow,so we take their free cash flow average,or last five years which we added here,we multiply that by 22.5 so i'm gonna do,a little bit of math here 2.9,3.2,and 10. so call it 3.2 billion dollars,so this will justify a 3.2 billion,dollar,market cap if you remember it was 42,billion that's an x that's a lot lot,lower so the shortcut i was telling you,about here's our eight pillars tab right,here look at this it does all the math,for you so you have to sit there and,worry about it but look at these big x's,valuation 40 more shares,i'm not worried about the debt as much,but a very low return on invested,capital,now does this mean i'm not gonna buy it,guys we don't know,what to do because if i were to tell you,this company's going to grow at 100 a,year for the next 20 years and never,issue another share and never take on,more debt i would buy this all day,but the question is is it going to so,we created the stock analyzer tool which,is right here on the right what this,does is every investment is the present,value of all future cash flow but we,don't know the future all we can do is,make assumptions about the future so if,you're new to this channel,you've probably never heard me say that,before but i'm paul and i'm a value,investor my goal is to find companies,that are selling for their less than,their intrinsic value,their intrinsic value being what i think,they're worth based on their future,potential,warren buffett does this ben graham does,it,our goal is to make conservative,assumptions about the future and find,companies that are mispriced because of,the public's perception of it a company,like shopify has fallen 80 percent it's,a great start to look there why because,if a company falls very quickly like,that and that much it means people are,getting disinterested in it i want to,find things that people are just,interested about,so if you like what i'm saying so far,stick along for the stock analyzer tool,and also don't forget to subscribe to,the channel so i'm going to do a 10-year,analysis on shopify,here's the revenue growth of the last,one five and they don't have the 10-year,numbers because they haven't been public,that long,40 58,now i'm gonna put in a low 10 percent,revenue growth a middle of 15 and a high,of 20. that's still a lot of revenue,growth guys even though it's,significantly below the last five years,that's still a lot of revenue growth,profit margin now here on the profit,margin i'm going to ignore the last year,i'm going to focus more on the five year,number 12.9 percent so i'm going to go,10,15 and 20. and the reason i'm with the,20 is even though it wasn't showing 20,anywhere as they get bigger and bigger,you saw their profit got higher and,higher they went from loss to big profit,that's going to drive the bottom line a,lot quicker so i'm going to put 20 in,there,free cash flow i'm actually gonna do the,exact same thing now pe now this is,where all the guns are gonna go flying,at me,guys the pe of 230. you might sit there,and say well i'll be conservative and,call it 60.,no,no no no no no,the average in the stock market over a,long period of time is 15.,so of a company like this,i'm going to sit here and say if it has,a lot of growth potential in the future,i'm going to call it 15 18 and 21 which,is still a very high pe and i don't,think justifiable,now usually for my desired annual return,i put in 50 i put in 12 and a half,percent but for this one,i'm gonna put in 15,why,because i don't have a lot of debt in,the past i'm making a lot of assumptions,about the profit margin in the future so,i want more margin of safety the higher,my desired return the greater my margin,of safety,so remember the company is currently,selling for 32.82 cents i'm at the,analyze button and what this analyze,button does it takes all these,parameters and tells me what to pay for,the stock today all right so if you,believe my high assumptions it's green,does that mean go buy it no it means go,do more research and decide one of the,things that research you can do is join,our em community because there are,thousands of people in here every single,day talking about stocks go in there,make it start a discussion about shopify,there probably are discussions about,shopify that you can do a quick search,go right to the discussion and discuss,what you think about shopify,the low end seven dollars a share and,the middle is 16. so the great thing,about our software is you can you can,set it to actually notify you when it,hits a certain price so if you don't,like 16 you don't like 34 you want to go,in the middle hit the plus mark and just,change your target price to 25 bucks and,notify me when it goes below there and,it'll text you email you it'll go on,your app and email you when it hits that,price,this is the key to investing is paying a,lower price for the stock,one thing you can do if you're an,options person is sell some put options,in the future at the strike price it,allows you to generate income while you,wait for the stock to fall to 16,now the key there is you get to buy 100,100 shares at a time so you need to,dedicate if you're gonna do a 16,strike price you need to dedicate 1600,of your cash to that this is a great way,to earn income while you get stocks that,you love going to prices that you love,again if you like what i've said here,please subscribe to our channel and,please click the video above about the,eight pillars and more in-depth analysis,of how you use the eight pillars to make,better investment decisions,you

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