 Welcome guys to another analysis video. This one is gonna be on Shopify ticker symbol SHOP SHOP trading at $46 down from $180 but it's had a huge run-up. If I take the log off you will see there's a Disney castle right there which means it was in a short-term bubble it's returning to some kind of a trend but that's not what we care about oh just before I go forward shout out to Elaine Rumi or might be Alan Rumi but this was a request follow him on trading view seems like a reasonable cat and if you have any request if you place a comment and give me a stock symbol I'm happy to do the analysis I'm always looking for new growth stock opportunities so of course I'm gonna put it into my Excel spreadsheet but let me show you where I got the data if you go to seeking alpha they will show you three years if you scroll down they'll show you three years of earnings per share EPS and if you pay for the premium which I happily do because it's not that expensive especially when they do the black Friday sales you get more data so I actually punched in these numbers for EPS into my worksheet before I jump over just showing you Shopify it's an online commerce it's Canadian so if you want to have an online store you go to Shopify that's what the business is so let's jump over to my worksheet and yellow means it's an input I have two sections of inputs I put in the price I put in the earnings but I also put them in I think I think it was nine years available and I punched them in and I grew the rest at 15% because it seemed like a reasonable growth rate going forward 30% is not what it actually comes out to but I'm using that for the valuation and the green tells me the buy zone or what a fair Peter Lynch style valuation is or would be peg ratio means price to earning to growth one growth rate is this growth rate so if the PE at 30 will give me one price the PE at 60 growth rate will give me PEG to historical PE of 15 typically on average over the past 100 years 15 PE most stocks a stock that isn't growing you know a company that has issues maybe debt or just wealth destruction might only get 8.5 PE a lot of mature companies might only get 8.5 PE so that's not what we're interested in we're interested in growth companies if we find out what they're earning which adds to the balance sheet and then we we give a terminal value which is what we might sell out at or it might be worth in 20 years I do 20 years just to smooth it out longer and then we discount backwards so according to this 20 10 years out the the price of shop can be anywhere between 95 and 380 dollars which looks wonderful but when you discount it back and discounting means hey I got to earn 10% because S&P 500 might give me that so come comparably I need to make 10% I'm taking risk we discount back to the present value of earnings I discounted all the all the earnings and the terminal value so it gives me a present value of earnings it's not quite DCF because DCF is the free cash flow but this is pretty accurate for my purposes so I use it 105 is what I'm getting the idea is it should be worth 105 over many years does that mean it should be 105 today no it doesn't because it because it has to materialize what it should be worth today is what these green zones are now if you look at Shopify it only makes four cents per share what would you pay for a company that earns four cents a share not a lot next year they're expecting to grow or make 20 cents a share what would you pay for a company earning 20 cents a share also not a lot so if we just look at this year's earnings we shouldn't be willing to pay very much so and what are investors are looking forward and if those earnings pan out that's why they're paying $47 a share right now so for me this is an expensive stock if there is if for whatever reason there's a sell-off in the market cross your fingers we we are looking this thing was 160 bucks isn't that insane obviously they had higher valuations a year and a half ago but if it gets into the green zone that's the you know that's the opportunity zone if this for whatever reason I don't know what's gonna happen but if you wake me up and you tell me hey people still expect good things but the price is a lot cheaper then I'm willing to take a shot at it do I want to pay this this value is like five years out I want to I don't want to pay a full price we're trying to imagine a tree in the future I want to pay a good price for today the seed price I want to pay a good price for seeds that become trees this is already like a seedling or you know a small tree this is this is expensive that's okay for some people because if it pans out then you'll still get rewarded if we look at present value of all these years it's 105 so the size of the opportunity right here I show 2.2 it's just my little dirty formula and discount to par over decades it's like buying a dollar for 50 cents if you're a big fan of shop you might be willing to buy it at this price because it used to be a lot higher me for my rules I would wait because if I buy today at 47 I'm paying a huge premium and I don't want to pay a huge premium because it adds risk so I would want to buy in the green zone you know 2025 if we were in 2025 I'd pay 11 bucks if we were in 2026 I'd pay 27 if I pay 47 I'm paying a premium and it makes it harder for me to break even I don't make any real real gains until the company grows into the valuation those are just my opinions this is how I look at it so I would wait the size of the opportunity is a two-bagger I have other stocks on my radar that are like eight times eight eights eight point oh opportunities which means there's more juice there's more meat on the bone so this would be a premium that's just what my worksheet says if I'll show this example obviously look if I put in Apple this is my baseline for everything because you know I started investing you know years ago but Apple did fantastic so I used that to back test and build my own model so if I look at 2008 based on this model in 2008 Apple was at one point into this green zone and the size of the opportunity because we have the actual results was a 13 13 present value so these deals do happen it's part of our reality Apple went into the green zone and it was a huge you know it did 8x 800 percent in eight years it did 64x in 16 years and that was only a 20 percent so this does happen and recessions bring these opportunities that's why I love recessions when you hear recession you need to think of opportunity so Apple was let's say three dollars and obviously it's 160 170 right now so huge huge wins valuation worksheet definitely worked I'll show you real quick my current Apple valuation shows there's not a lot of opportunity at least not not to beat the s&p present value shows 158 apples like 160 something right now so the opportunity is pretty flat you'll still you'll still make money but it'll you'll be it'll be more risk and more time so I'll leave Snapchat shop right there for those interested and again I'm giving away the worksheet I give away in the comments I provide a link a lot I've seen a few people take advantage of that so if you want to make your own worksheet it'll just make you a better investor it'll make you force it'll force yourself to look at companies that actually make money there's a lot of companies that don't and it will just give you a better vision of what it could look like it'll help you to extend your holding time if I look at the chart the picture trader in me says that this doesn't look very good and maybe we will get an opportunity to buy this cheaper you can call this say head and shoulders a cup and handle whatever you want to call it just to get engaged it just it also looks like arc if I jump over the same situation arcs $35 will it get below that I hope so I look at the Russell I'm using this chart because it looks better on when I have screen recorded but hopefully we get a recession because too many stocks are expensive if we get our recession there are so many opportunities so many trades that open up and this is shop Shopify if you have a good map you'll make better decisions and for our buddy Alan I hope this was helpful cheers