YB new stock pitches (Fri, Feb 28)

TopBuild (BLD), an insulation distributor and installer, has been consolidating the fragmented market since its 2015 spinoff from Masco, achieving a 31% CAGR. With a 20% market share in an $18 billion opportunity, the company has made 45 acquisitions in 8 years, driving a 29% EBITDA CAGR. TopBuild boasts a 7.8% FCF yield and 1.3x debt/EBITDA ratio. The company has grown adjusted EBITDA from $100 million to $1 billion over 9 years and repurchased $966 million in shares in 2024. Despite near 52-week lows due to a housing market slowdown, long-term industry growth is expected as new housing supply increases. Risks include cyclicality and customer concentration, with the top 10 customers accounting for 11% of revenue. Management, led by CEO Robert Buck, is incentivized through performance-based compensation. The 5-year upside potential ranges from 30% to 177%, with a price target of $836.54, based on assumptions of 6-12% revenue growth, 14-16% pretax margins, and a 15-20x multiple.

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Jackson Financial (JXN) trades at 0.65x price to tangible book value and 4.44x P/E, with a market capitalization of $5.995 billion. The company plans to return $700-800 million to shareholders in 2025, representing an 11.6% yield. JXN's free cash flow is currently understated due to growth, as capital is reinvested to maintain liquidity ratios during the 'silver tsunami' of baby boomers buying variable annuities. The company saw a 39% year-over-year increase in variable annuities sold in 2024. JXN earned $18.76 per share in operating income for 2024, growing 14.6% from the previous year. Management aims to use share buybacks to create an inorganically growing dividend. The stock has potential to triple as multiples catch up to mature financials (15-20x P/E). With a 22% earnings yield and strong growth prospects, JXN is positioned as a long-term compounder benefiting from demographic trends.

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KORU Medical (KRMD) specializes in subcutaneous drug delivery solutions, with its core business growing 12-14% domestically and 20-24% internationally. The company's novel therapies segment saw a 276% increase in Q3, with 16 pipeline collaborations representing a $2.7B TAM. Q4 revenue grew 23%, with FY24 up 18% to $33.7M. KORU is becoming cash flow positive, with Q4 2024 expected to break even and FY25 projected to be positive. The company has three main growth avenues: domestic, international, and novel therapies. Key drivers include market share gains, a shift towards SCIg and prefilled syringes, international expansion, and potential launches in oncology and rare diseases. With a market cap of $170M and FY25 EV/S of 4.17x, investors are advised to accumulate shares at $3.5-$3.7, despite challenging FY25 comps and a projected $0.07 EPS loss for that year.

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