Friday's best stock ideas...

Fresenius Medical Care (FMS) leads globally in handling end-stage renal disease (ESRD) patients via their dialysis clinic network, care coordination, and innovative medical technology. The company is predicted to experience a significant demand in developed markets like the U.S., and in emerging markets like China in the long term, post-pandemic. This growth is premised on expectations of low to mid-single digit global ESRD patient growth. In-depth global operational experience provides critical insights for service offerings and product innovation. Fresenius' systems are popular even among its rivals, as evidenced by its 35% market share in dialysis equipment/consumables while serving just 9% of ESRD patients in global clinics. Bulls cite geographic and business diversification, at-home system treatment rates increase and venturing into new ESRD treatment methods as potential growth indicators. Bears caution on potential profit contraction due to policy changes, pricing pressure, and uncertainty around significant margin growth in the future. The company is currently rated with a BUY rating and a $37 price target.

Read the full article here (paywall). Read time: 9 min

The author recommends Petco Health and Wellness (WOOF) for its strong retail and growing online and vet service sectors, despite an 85% stock drop since early 2021 due to pandemic impacts. They value Petco's position in the $119 billion U.S. pet industry, boosted by enduring pet adoption trends from the pandemic. With over 1500 stores and a unique vet hospital network, Petco stands out from competitors like PetSmart and Chewy. Despite recent margin drops from high to low-margin product shifts, they foresee a rebound and predict a stock price doubling in three years, reaching $7 billion revenue by FY27 with a 9% EBITDA margin. They acknowledge risks like high post-IPO leverage, macroeconomic factors, and competition, but remain bullish due to Petco's market position and potential in vet services.

Read the full article here (free with guest account). Read time: 9 min

The author is optimistic about Nathan's, valuing it at $112.15 per share from its current $69 due to its diversified strategy, despite the beef industry's slump. They commend the management's 35-year value creation and the transition to an asset-light model. Nathan's licensing agreement with John Morrell till 2032, which guarantees increasing royalties, contributes to 90% of its licensing revenue/EBITDA, with other smaller licensing agreements adding to the revenue. The Branded Product Program (BPP) allows foodservice operators to leverage Nathan's brand, attracting notable operators and generating high operating margins, though there's risk in revenue concentration from top BPP customers. The company operates four restaurants in New York and franchises 234 units globally. Despite its $80M debt, Nathan's redemption of part of its notes indicates solid financial management. The valuation is based on a Free Cash Flow (FCF) multiple of 11.76 and varying EBITDA multiples across different segments, highlighting a 62% upside potential.

Read the full article here. Read time: 3 min

The author is bullish on Piscines Desjoyaux, a small, 70% family-owned French swimming pool company with a €106 million market cap. Despite the industry's low 1-4% annual growth, they value the firm's significant French market share, where 1 in 10 own a swimming pool, and its historical operating profits above €20 million annually, although noting a recent revenue decline due to cyclical demand. The firm demonstrated cost-cutting resilience during the 2008/2009 financial crisis. Its conservative balance sheet shows €70 million in cash against €34 million in debt, with an 8.5% dividend yield and a 53% payout ratio. Despite language barriers, the author found the company's expansion plans into The Netherlands and Poland. They conducted a conservative valuation, considering a revenue dip followed by recovery, leading to an intrinsic value of €151 million or €16.8/share, suggesting an internal rate of return above 15%. The author deems the market's current undervaluation irrational, given its growth and excess cash compared to five years ago, and appreciates the company's simplicity, family ownership, economic adaptability, geopolitical stability, dividend payouts, and strong cash position, urging individual due diligence before investment.

Read the full article here. Read time: 4 min

The author warns against investing in FingerMotion, citing its extensive stock promotion flagged by OTC Markets, particularly on social media, that coincided with a 350% stock price surge. They criticize the company's $300 million Shelf Registration and $25 million ATM agreement, anticipating significant shareholder dilution. FingerMotion is accused of using accounting gimmicks to exaggerate revenue growth while facing deteriorating gross margins and escalating cash burn. The issuance of millions of unsold shares to settle debts, insider selling activities, and the precarious cash position with potential further dilution from shares held by PIPE investors are flagged as concerning. The author draws a parallel with Knightscope ($KSCP), which experienced a 50% share price drop amid similar circumstances, implying a bearish outlook for FingerMotion with a price target of $1.

Read the full article here. Read time: 16 min

The author provides a bullish overview of Howdens Joinery, a UK-based construction materials supplier, noting several growth factors that may make it an appealing investment. While the construction market isn't growing quickly (~3.5% per year expected in the UK), the author believes that Howdens can drive growth by expanding its store count, developing a strong customer base among professionals, and enhancing its supply chain and product selection. A key strength noted is Howdens' efficiency in its smaller, pro-customer-focused model that maximizes utilization of store space. The financials are also deemed attractive thanks to Howdens being debt-free, having £308 million ($403 million) in cash on hand, and generating impressive cash flow. However, the author notes several risks with investing in Howdens, including its operation in a foreign market, cyclical volatility, and competition

Read the full article here. Read time: 6 min