In this special “new year” edition of Wealthy Retirement, we’re running a stock through the Safety Net model and The Value Meter… at the same time.

Using these two popular methodologies in tandem – one for dividend safety, the other for valuation – can give us a more complete picture of whether a stock is worth investing in.

Without further ado, here’s the first-ever combined edition of Safety Net and The Value Meter… featuring a company that just made a potentially industry-changing announcement.

Chief Income Strategist Marc Lichtenfeld

Safety Net

Now that the calendar has turned to 2026, lots of folks are making promises to themselves that they won’t keep. However, one resolution just got much easier.

Losing weight.

GLP-1 (glucagon-like peptide-1) drugs have been game changers for patients and the pharmaceutical companies that make them. Now, oral GLP-1 drugs will again move the needle significantly for customers and drugmakers.

Last week, Danish pharmaceutical giant Novo Nordisk (NYSE: NVO) received FDA approval for an oral version of Wegovy, which was previously available by injection only. The change to the company’s financial picture will be momentous.

We won’t have the full 2025 figures until next month, but free cash flow is projected to come in at $7.7 billion, a 28% decline from 2024’s $10.7 billion and 36% below 2023’s total.

However, because of the new approval, free cash flow is expected to jump 34% to $10.3 billion in 2026 and another 27% in 2027 to $13.2 billion.

The sharp decline in 2025’s free cash flow costs Novo Nordisk a couple of points on its dividend safety rating.

Another issue is the payout ratio.

Novo Nordisk is expected to have paid shareholders $7.1 billion in dividends in 2025. If free cash flow slid 28% as projected, the payout ratio would rise to 92%, which is way too high.

This year’s projected $8.1 billion in dividends would lead to a payout ratio of 78% based on the consensus cash flow estimate. That is also too high, but it’s within spitting distance of the 75% threshold for Safety Net. If cash flow is a little higher than expected (or dividends paid is a little lower) in 2026, the payout ratio may come in below the 75% level, and the company would not be penalized.

In 2025, American investors received two semiannual dividends totaling $1.73 per share, which comes out to a 3.3% dividend yield.

In its local currency, the Danish krone, Novo Nordisk has raised its dividend for 31 consecutive years – though American investors may have seen slight reductions because of currency fluctuations.

Due to falling cash flow and a too-high payout ratio, Novo Nordisk’s dividend safety rating is low. But this is an unusual situation with the company’s fortunes about to change dramatically due to oral Wegovy.

Combine that with a three-decade run of annual dividend increases and a likely upgrade this year, and the dividend should be okay despite the poor rating.

Dividend Safety Rating: D

Director of Trading Anthony Summers

The Value Meter

Sometimes the best businesses make only decent stocks – not because the company slips, but because expectations outrun what the cash can reasonably deliver.

That’s the situation with Novo Nordisk today. The business is still excellent. The stock, after a long reset, is finally being treated with more discipline.

The company is the unquestioned global leader in diabetes and obesity treatments. And Ozempic and Wegovy – overnight name brands, it seems – have reshaped how investors think about the company.

For a while, the market assumed that dominance meant inevitability. But recent results remind us that even great businesses have limits.

Over the first nine months of 2025, sales rose 12%, or 15% at constant exchange rates. Operating profit increased 5%, held back by roughly 9 billion kroner (roughly $1.4 billion) in restructuring costs tied to a companywide transformation. Free cash flow came in at 63.9 billion kroner (about $10.1 billion). That’s lower than the previous year, but still substantial.

Capital spending climbed as Novo expanded its manufacturing capacity. That spending isn’t optional. It’s the cost of staying competitive in GLP-1 therapies. Management also narrowed guidance and lowered growth expectations for diabetes and obesity treatments.

Novo trades at an enterprise value-to-net asset value ratio of 8.43, well above the universe average of 3.82. On that metric alone, the stock still looks expensive. The market continues to pay a premium for quality.

Cash flow is what keeps that premium from becoming a problem. Novo generates quarterly free cash flow equal to 11.28% of its net asset value. The universe average is just 1.12%. In plain terms, the company turns its assets into cash about 10 times more efficiently than the typical company. That matters.

Novo is consistent too. While the Safety Net model rewards year-over-year cash flow growth, The Value Meter prioritizes quarter-over-quarter growth. Over the past 12 quarters, the company grew its quarterly free cash flow 54.5% of the time, compared with 46.7% for peers. It also produced positive free cash flow in each of the past 12 quarters.

This isn’t a lucky stretch. It’s a durable pattern.

As we saw above, however, the stock has gone through a humbling year. Shares peaked in mid-2024 and slid through much of 2025.

That move wasn’t driven by collapsing fundamentals. It was driven by disappointment. Investors stopped paying for perfection.

That change is important. Novo is not cheap in absolute terms. You are still paying for elite assets. But you are no longer paying as if nothing can go wrong.

The business earns its valuation. The balance sheet is strong. The cash engine is real. What’s different now is the margin of safety. After the sell-off, it finally exists.

This isn’t a stock for traders chasing excitement. It’s for patient investors who want exposure to a world-class cash producer after expectations have cooled. The upside may be quieter from here, but it no longer depends on flawless execution.

The Value Meter rates Novo Nordisk as “Slightly Undervalued.”

The post Novo Nordisk: What’s Next for the Pharma Giant? appeared first on Wealthy Retirement.

Those were the strong, harsh words my father uttered when I couldn’t find the strength to walk up the steep mountain near my grandparents’ home in Yauco, Puerto Rico – the same mountain my mother swore she climbed every day as a little girl to get to school.

I had to stop every three minutes. My father, a lifelong athlete and former marathon runner, saw my struggle as an embarrassment. In his own way, I think he meant to motivate me. Instead, he lit a fire.

I was angry. I was offended. But I was also determined to prove him wrong.

The next day, we made the same 30-minute trek to the top of the mountain. This time, I popped in my headphones – tuning out my dad’s voice – and pushed forward without stopping once. I even made the walk back down without taking a single break.

“I sure showed him,” I thought.

Looking back now, I realize that it was he who showed me.

He showed me I was capable of more than I believed. I didn’t need weeks of training. I just needed resolve – a decision to stop being lazy, to stop holding back.

In the words of Napoleon Hill, “Effort only fully releases its reward after a person refuses to quit.”

That lesson stuck with me.

I try not to measure my worth by what I can do right now. I focus on what’s possible – on the good I can do if I commit fully. That mindset has shaped how I live, how I work, and how I invest.

It’s also how I approach this column.

The Value Meter was never meant to be a finished product. It’s evolved over time, becoming more objective, more robust, and more useful to everyday investors.

Today, I’m proud to officially introduce version 3.0 of The Value Meter.

At its core, the mission is the same: to help you quickly gauge whether a stock is undervalued, overvalued, or fairly priced based on real business fundamentals.

But this latest version includes three important upgrades:

These changes make the system smarter and sharper, but it will still be grounded in the same common-sense approach that’s made value investing so powerful for generations. (It’s also shifting from a six-point scale to a 10-point scale, with 0 being the most undervalued and 10 being the most overvalued.)

Let’s take the upgraded Value Meter for a spin.

Today’s featured company is one that embodies long-term discipline and durable strategy.

Deere & Company (NYSE: DE) is the world’s leading manufacturer of agricultural and construction equipment. From John Deere’s first steel plow, forged in 1837, to today’s precision agriculture technology, this Illinois-based giant has consistently evolved to meet changing needs.

The financial picture tells a story of resilience during challenging times.

In the second quarter, net sales dropped 16% to $12.8 billion year over year. Net income fell 24% to $1.8 billion, or $6.64 per diluted share. Large agricultural equipment demand declined roughly 30% in the U.S. and Canada.

Despite these headwinds, Deere maintained an 18.8% operating margin for equipment operations. The company produced $568 million in operating cash flow during the first six months of fiscal 2025 even as revenue fell 22%.

Deere faces additional pressure from tariffs, as it expects over $500 million in pretax impact for fiscal 2025. However, the company holds nearly $8 billion in cash and equivalents, which provides substantial financial flexibility and helps fund its 1.3% dividend yield.

The stock has reflected these mixed signals. After peaking near $430 in mid-2023, shares tumbled to around $340 over the next year before rising to current levels around $500.

Let’s see what the new and improved Value Meter tells us about Deere’s true worth.

The company’s enterprise value-to-net asset value ratio (EV/NAV) of 5.92 means you’re paying roughly $6 for every dollar of business assets left over after covering the liabilities. With the average EV/NAV sitting at 12.32, Deere is trading at less than half the typical premium.

Deere excels in cash-efficiency, with a free cash flow-to-net asset value (FCF/NAV) of 4.02%. This means the company generates over $4 in free cash flow for every $100 in net assets. Compare that with the broad market average of -26.98%, and you’re looking at a rare cash-generating machine.

Over the past three years, Deere’s free cash flow has grown quarter over quarter nearly 64% of the time, compared with the 47.58% average.

This isn’t a company that’s coasting on past success. Deere is using this downturn to strengthen its competitive position. It is investing $20 billion over the next decade in U.S. manufacturing and technology development. That will help it continue to create innovations like its See & Spray precision technology, which covered 1 million acres in 2024 and already has 1,000 new orders this year.

Digital engagement metrics tell the story. Engaged acres (the number of acres that are accounted for in the company’s online farm management system) grew 15% to 475 million, creating sticky, high-margin software revenue that compounds over time.

Of course, it won’t be smooth sailing ahead. Agricultural cycles can last years, and tariff uncertainty adds complexity.

But for patient investors, temporary problems often create the best opportunities.

The Value Meter rates Deere & Company as “Slightly Undervalued.”

What stock would you like me to run through The Value Meter next? Post the ticker symbol(s) in the comments section below.

The post John Deere: A Cash Machine Hidden in Plain Sight? appeared first on Wealthy Retirement.

Today, in the spirit of “teaching a man to fish,” I’m taking you behind the scenes to show you exactly how I determine the safety of a company’s dividend.

As far as I can remember, I’ve never outlined my full Safety Net criteria before, so I’m eager to share the details with you.

The first thing I look at is free cash flow.

I focus on free cash flow rather than earnings because earnings include all kinds of non-cash items and are easily manipulated.

For example, earnings can include revenue that has been recognized but not received. Let’s say a company books a $1 million sale on December 29. Those funds would count toward the company’s revenue for the year, and that revenue would then trickle down the income statement, with a portion of it being added to earnings.

However, the company sends the invoice on December 30 and, as of December 31, has not been paid.

That $1 million still counts toward the year-end revenue and earnings totals, but it won’t be reflected in free cash flow because the company has not received the money yet.

Another example is stock-based compensation. When a company grants stock to employees, it is counted as an expense that lowers earnings. But no cash went out the door, so it doesn’t affect cash flow.

In short, cash flow is how much cash the company actually brought in (or sent out).

When it comes to evaluating the safety of a company’s dividend, we want to see that the cash the company generated is enough to cover the dividend. That’s because dividends are paid in cash, not in “earnings.”

The best way to determine whether the cash is sufficient to cover the dividend is by calculating the company’s payout ratio, or the percentage of its free cash flow that it pays out in dividends. (Most people use earnings to calculate payout ratio, but I prefer free cash flow for the reasons I explained above.)

We calculate free cash flow by going to a company’s statement of cash flows and subtracting its capital expenditures from its cash flow from operations.

Below is McDonald’s‘ (NYSE: MCD) statement of cash flows from its 2023 annual filing with the SEC.

The key numbers we’re looking at are cash provided by operations, capital expenditures, and common stock dividends.

You can see that cash flow from operations was $9.612 billion and capital expenditures (sometimes known as “capex”) were $2.357 billion. To arrive at our free cash flow figure, we subtract capex from cash flow from operations. McDonald’s’ free cash flow comes out to $7.255 billion.

Then we look at common stock dividends, which totaled $4.533 billion.

This tells us that McDonald’s paid out $4.533 billion out of the $7.255 billion that it generated in cash. That’s a payout ratio of 62%.

If we’d used the $8.469 billion earnings figure (shown in the “net income” row at the top of the page) to determine the payout ratio, the payout ratio would’ve been 54%.

But remember, dividends must be paid in cash, so we’re not interested in what percentage of earnings the company paid out in dividends. We need to know what percentage of its cash was paid out in dividends.

In Safety Net, my payout ratio threshold for most companies is 75%. If the payout ratio is above 75%, I no longer have confidence that the company could afford its dividend if it were to hit a rough patch or its cash flow were to decline. But if the payout ratio is below 75%, the company has a decent buffer to protect it if it has a bad year.

However, there are some exceptions to my 75% rule. I allow real estate investment trusts (REITs), business development companies (BDCs), and partnerships to have payout ratios of up to 100% because they are legally required to pay out 90% of their earnings. For that reason, they usually have higher payout ratios than other companies.

Also, we use a different measure of cash flow for these types of companies. For REITs, we use funds from operations (FFO), for partnerships, we use distributable cash flow (DCF), and for BDCs, we usually use net investment income (NII). For banks and mortgage REITs, we use net interest income.

When I’m determining my Safety Net grades, every stock starts out with an “A” rating and then gets downgraded depending on several factors.

Safety Net looks at both the previous year’s payout ratio and the current year’s expected payout ratio. The stock gets downgraded for each one that’s above 75% (or 100% for REITs, BDCs, and partnerships).

This year, McDonald’s’ payout ratio is forecast to drop from 62% to 53%, which is still well below my threshold.

I also look at cash flow growth. If cash flow has declined over the past year or past three years or is expected to fall in the current year, the stock’s safety rating will be downgraded.

McDonald’s had a big jump in free cash flow in 2023, so its one- and three-year growth rates were positive. Free cash flow is forecast to increase this year as well.

Lastly, we look at the company’s dividend-paying track record over the last 10 years. For each dividend cut in that span, the dividend safety rating gets downgraded by one level. If the company has raised its dividend in each of the last 10 years, it will get a one-level upgrade, because that tells me that management is committed to sustaining the dividend even if the financials get troublesome.

McDonald’s has no dividend cuts in the past 10 years. In fact, it has raised the dividend every year for the past 49 years, so it gets a bonus point.

To sum it up, each stock begins with an “A” rating and a score of 0, but its grade is adjusted based on the following factors:

• Previous year’s payout ratio above 75% (or 100% for REITs, BDCS, and partnerships): -1
• Current year’s expected payout ratio above 75% (or 100% for REITs, BDCS, and partnerships): -1
• Negative cash flow growth over the past year: -1
• Negative cash flow growth over the past three years: -1
• Negative expected cash flow growth over the next year: -1
• Dividend cut within the past 10 years: -1 per cut
• 10 years of consecutive dividend increases: +1.

If the company ends up with a score of 0 or 1, it gets an “A.” If its score is -1, it gets a “B.” A score of -2 earns a “C” grade, a score of -3 gets a “D,” and a score of -4 or below gets an “F.”

McDonald’s’ payout ratio was within my comfort zone last year and should remain there, its free cash flow has been growing and is expected to continue growing this year, and it has no history of dividend cuts in the past 10 years.

With no downgrades, the stock gets an “A” for dividend safety.

Now you know how the Safety Net sausage – or, in this case, Sausage McMuffin – is made. But feel free to continue letting me know what stocks you’d like me to analyze here in Safety Net. Just leave the ticker symbols in the comments section below.

Dividend Safety Rating: A

The post The Safety Net System: How I Evaluate Companies’ Dividends appeared first on Wealthy Retirement.

A quick glance at the stock’s price chart should give you an idea of what I mean. Following a disparaging report against the company’s sales practices earlier this year, shares tumbled sharply, and they are still in the process of rebounding from their multi-year lows.

But despite the negative press, I think the stock deserves a serious look. Let’s run it through The Value Meter.

First, let’s look at Globe Life’s enterprise value-to-net asset value (EV/NAV) ratio, which gives us a sense of how the market is valuing the company’s assets relative to its peers’. Globe Life’s EV/NAV sits at 2.04, a significant discount to the market average of 6.56 for companies with positive net assets.

That’s not a bad discount. But is it truly a bargain?

The company’s ability to generate cash is crucial to answering that question, and Globe Life shows some strength in that regard.

Over the past four quarters, Globe Life’s free cash flow averaged 7.45% of its net assets. While this is slightly below the peer average of 8.04%, it’s not far off. More importantly, the company has churned out positive free cash flow in each of the last four quarters. That’s the kind of consistency value investors crave.

Globe Life’s first quarter results were quite solid. Net income rose 13.7% to over $254.2 million, up from $223.6 million a year ago. And net operating income hit $264.1 million, a 6.5% year-over-year increase.

The company also reported that the underwriting margin for its life insurance operations, which account for about 70% of its premium revenue, grew 6% year over year to $309 million in the first quarter. Underwriting margin for its health insurance segment, which makes up the other 30% of premium revenue, increased 3% to $93.8 million.

These numbers demonstrate Globe Life’s ability to profitably grow its core business.

But it’s not all rosy. The company is facing some headwinds.

A recent short-seller report and a Department of Justice inquiry into sales practices at its American Income Life division have put pressure on the stock.

Management has strongly refuted the short seller’s claims and is cooperating with the DOJ investigation. They’ve also hired an independent law firm to conduct a review of the allegations.

These issues create uncertainty, which the market hates. However, they also present an opportunity for investors who are willing to look past the short-term noise.

Globe Life’s business model has proven resilient over many decades. The company’s focus on serving middle-income Americans with basic protection life insurance and supplemental health products has consistently generated stable cash flows.

Moreover, Globe Life’s management seems confident in the company’s future. They’ve increased their 2024 earnings guidance to a range of $11.50 to $12.00 per share, representing about 10% growth at the midpoint. The company is also planning to repurchase $350 million to $370 million worth of shares this year, a sign that the insiders believe the stock is undervalued.

For patient investors willing to weather some potential volatility, Globe Life offers an interesting value proposition. The company’s strong market position in middle-income insurance, coupled with its consistent cash generation, provide a solid foundation. If Globe Life can navigate its current challenges and maintain its growth trajectory, today’s price could prove to be a bargain in hindsight.

The Value Meter rates this one “Slightly Undervalued.” However, the ongoing investigations and potential reputational damage warrant some caution.

What stock would you like me to run through The Value Meter next? Post the ticker symbol(s) in the comments section below.

The post Globe Life: Tarnished Insurance Giant… or Undervalued Gem? appeared first on Wealthy Retirement.

I expect it to revolutionize medicine.

Instead of scientists searching for years for a molecule that may treat a disease and then spending many more years and hundreds of millions of dollars to figure out whether it works, AI can take every piece of knowledge about that disease and come up with likely drug candidates, drastically reducing the drug development time frame.

And AI can answer more questions than Google because it allows you to ask follow-up questions or modify your requests.

When I describe to my kids what life was like before the internet, I’m pretty sure they picture it in black and white and everything moving at a snail’s pace. I suspect 20 years from now it will be the same when we talk about the pre-AI era.

I believe AI will be like the internet revolution but bigger. So that leaves investors dying to know the answers to two questions…

1. Which AI stocks should I buy?

Many investors are looking for that tiny company that is going to become the next Microsoft (Nasdaq: MSFT).

They may be out there, but it is still very early in the game. Remember how many internet companies there were that died? Netcentives, theGlobe.com, eToys and – of course – the infamous Pets.com…

Here’s my advice. Instead of searching for the next Microsoft, choose Microsoft. The tech giant is already devoting lots of resources to AI, including a 49% stake in ChatGPT, and not many companies have more resources than Microsoft.

Other tech giants, like Amazon (Nasdaq: AMZN), Meta Platforms (Nasdaq: META) and Cisco Systems (Nasdaq: CSCO), will likely keep their commanding leads. Nvidia (Nasdaq: NVDA) is already one of the big winners, and while it will face competition, it has a lead over other chipmakers in the AI space.

Go with what you already know and who is already a dominant player.

But there’s a second question I’ve been seeing from readers…

2. How can I generate income from AI?

As you likely know, the majority of growth stocks (including most tech firms) don’t pay dividends – and those that do pay dividends often have unimpressive yields.

That’s because they invest their excess cash into growing their businesses rather than paying it out to shareholders.

Of the five stocks I mentioned above, Cisco Systems is the only one with a yield above 1%.

With many of the leaders in the tech sector – and the AI space, specifically – opting not to pay dividends, some income investors are feeling left out in the cold, unable to participate in the market’s latest big trend.

The solution is to find the rare AI plays that give you the best of both worlds: explosive capital gain potential AND stable, reliable income.

Luckily, I’ve recently uncovered three opportunities that meet my strict criteria for AI income plays:

• The first is an unusual trust that gives you income from America’s AI boom each and every quarter. As a trust, it is legally required to distribute 90% of its available cash to its partners via special tax-sheltered dividends – that’s money that goes directly to YOU!
• The second is a breakthrough AI biotech that’s partnering with two of the household names I listed earlier: Nvidia and Amazon. Even better, this company has raised its dividend for 13 years in a row.
• The third is a very special play… a unique fund that boasts a whopping 10% yield and invests in high-tech AI companies.

I’ve compiled all the details on all three of these opportunities in what I’m calling my Free AI Income Playbook, and I’d love to share this playbook with you today.

Simply click here to claim your copy. (There’s no catch – it won’t cost you a cent!)

The post The Top 2 Questions People Are Asking About AI appeared first on Wealthy Retirement.

So today, we’re going to see what The Value Meter has to say.

(By the way, I’m happy to keep taking your requests. If you have a stock you’d like me to run through The Value Meter, just drop the ticker in the comments section at the bottom of this article.)

For those of you who are not familiar, haptics allow people to use their sense of touch to engage with products and experience the digital world.

Immersion’s intellectual property and technological expertise enable it to develop high-quality, immersive haptic experiences across a wide range of applications, from mobile devices and interior car interfaces to gaming and virtual reality.

The stock has had a shaky ride over the past several years, but its recent performance has been impressive. Shares have more than doubled since 2022 to a current price of about $10, with the stock soaring nearly 40% in the past month alone.

This rapid appreciation in share price has caught the attention of many investors – and prompted a closer look at the company’s fundamentals and growth prospects.

Immersion currently trades at an enterprise value-to-net asset value (EV/NAV) ratio of just 0.7. That’s a 90% discount to the average EV/NAV ratio of 7 for companies with positive net assets.

However, as I always point out, a low EV/NAV ratio alone doesn’t necessarily make a stock a screaming buy. To get a more complete picture, we also need to examine the company’s ability to generate cash.

Over the past year, Immersion has recorded four straight quarters of positive free cash flow. In that span, its free cash flow has averaged 6.4% of its net asset value. That’s modestly below the 8% average among its peers, but not so far below it as to justify the clear discount on Immersion’s EV/NAV.

The company’s most recent quarterly results underscore its strong fundamentals and its tightening grip on the haptics market.

In Q1, Immersion grew revenue by a jaw-dropping 517% year over year to $43.8 million, primarily driven by a one-time licensing and settlement agreement with Meta Platforms. While this massive revenue growth rate may not be sustainable in the long run, it highlights the value of Immersion’s intellectual property and its ability to monetize its haptic technologies with major players in the industry.

The company also posted excellent profitability and free cash flow in the quarter, bolstering its cash position to a rock-solid $179 million. That gives Immersion plenty of dry powder to fund new growth initiatives, make acquisitions and keep rewarding shareholders with a steady stream of dividends.

But perhaps most exciting is Immersion’s gargantuan growth opportunity as haptics go mainstream across multiple industries. Due to the proliferation of touchscreens, wearables and virtual reality devices, the demand for realistic and engaging haptic feedback is poised to skyrocket in the coming years.

As the clear leader in this space and the owner of a massive intellectual property portfolio, Immersion is ideally positioned to capitalize on this rising tide and expand its licensing model.

Immersion checks all the boxes of a classic “growth at a reasonable price” (GARP) play: a wide moat, strong and improving financials, a below-average valuation, and exposure to multiple secular growth markets.

The stock doesn’t come without risk, but the risk/reward balance looks quite compelling at current levels. And for investors who can stomach some volatility and take a multiyear view, this is the kind of under-the-radar gem that could be a huge winner in the long run.

The Value Meter rates Immersion as “Slightly Undervalued.”

As I said above, if you have a stock that you’d like to have rated by The Value Meter, leave the ticker symbol in the comments section below.

The post Immersion: An Undervalued “Touch Tech” Play Ready to Surge appeared first on Wealthy Retirement.

Over the past decade-plus, shares have soared more than tenfold – an absolute dream for investors. This growth was thanks to Micron’s strong market position and the increasing global demand for memory and storage products and services.

But with shares trading near their all-time high, investors may be wondering whether there’s still value to be found in this stock or its best gains are already behind it.

To answer this question, let’s run Micron through The Value Meter and take a closer look at its fundamentals.

The company currently trades at an enterprise value-to-net asset value (EV/NAV) ratio of 3.2, which seems to be a clear discount to the average of 7 among its peers. But, as always, we must consider the company’s ability to generate cash flow.

Micron’s free cash flow has been negative in each of the past four quarters, averaging -1.8% of the company’s net assets during that span. While that’s better than the average of -3.8% for similar firms, it still raises some concerns about the company’s cash generation capabilities.

It’s important to keep in mind the capital-intensity and seasonality of the memory chip business when evaluating Micron’s performance. The company operates in a cyclical industry that requires significant investments in research and development and manufacturing facilities to stay competitive.

Micron faced some challenges in recent years, such as weak market demand and supply chain issues. But thanks to its strong balance sheet and disciplined approach to spending, it weathered the storm relatively well.

Looking ahead, there are reasons to be optimistic about Micron’s future prospects.

The company recently reported a strong second fiscal quarter, with revenue, gross margins and earnings per share all coming in well above guidance.

This impressive performance was driven by improved supply-demand dynamics in the memory market, which led to robust price increases for Micron’s products. As a result, the company has returned to profitability, and it expects further price increases throughout 2024.

This positive outlook sets the stage for record revenue and strong profit growth in fiscal 2025. And as industry fundamentals continue to improve, Micron’s free cash flow is well positioned to turn positive in the coming quarters.

Plus, Micron stands to benefit significantly from the rapid advancements in artificial intelligence (AI). Memory and storage play a crucial role in developing and deploying generative AI systems.

As AI workloads continue to drive increased demand for memory and storage in servers, PCs, smartphones and other devices, Micron is extremely well equipped to capture this growth opportunity.

Bottom line? While Micron’s recent cash flow performance has been less than stellar, the company’s valuation seems to reflect its solid competitive position, strengthening cash flow profile and substantial growth runway thanks to the ongoing AI revolution.

The Value Meter rates Micron Technology as “Appropriately Valued.”

If you have a stock that you’d like to have rated by The Value Meter, leave the ticker symbol in the comments section below.

The post Has Micron Technology Already Seen Its Biggest Gains? appeared first on Wealthy Retirement.

But as many of the most successful investors in history have proven time and again, it’s often the most unassuming businesses that prove to be the best long-term investments.

And few companies exemplify this better than Colgate-Palmolive, a true blue chip cash cow.

Interestingly, despite the company’s “boring” reputation, its share price has surged nearly 40% from its 52-week low back in October.

This serves as a reminder that while boring businesses may not always capture the limelight, their ability to generate steady cash flows – which then boost their share prices – should not be underestimated.

But the crucial question we must ask is whether the market has appropriately valued Colgate-Palmolive’s stock. To answer this question, let’s dive deeper into the company’s financials.

Colgate’s enterprise value-to-net asset value (EV/NAV) ratio of 108 is well above the average of just 6 for companies with positive net asset values. At first glance, that valuation may seem astronomically high, but a closer look at the company’s cash flow generation reveals that there’s a good reason for it.

Over the past four quarters, Colgate’s free cash flow averaged an astounding 157.2% of its net assets. That’s nearly 18 times higher than the 8.9% average among companies with similar financial profiles.

In other words, Colgate has been churning out cash relative to its assets at a rate that puts the overwhelming majority of businesses to complete shame. And the company has maintained this incredible level of cash generation consistently over the years.

The best part? Colgate still has plenty of room to grow.

In the first quarter of 2024, Colgate’s organic sales rose an impressive 9.8% year over year and net sales surpassed $5 billion. This growth was evident across all divisions and in each of the company’s four core product categories: oral care, personal care, home care and pet nutrition. Notably, both sales volume and pricing contributed positively to the top line.

This balanced, broad-based growth shows the enduring strength of Colgate’s brands. And despite its already strong market position, the company continues to invest heavily in its products, as evidenced by the 16% increase in its advertising spending during the quarter.

Looking ahead, Colgate’s management is optimistic about the company’s prospects. It just raised its full-year guidance for organic sales growth from 3%-5% to 5%-7%, and it expects double-digit earnings per share growth for the year.

Clearly, Colgate’s proven playbook of innovating across its core businesses, driving “premiumization” in high-growth segments and expanding into adjacent categories is resonating with consumers around the globe.

In a world filled with money-losing “story stocks” that are long on hype and short on cash flows, there’s something to be said for a battle-tested compounder with an unrivaled track record of rewarding shareholders.

The quality and consistency of Colgate’s cash flows more than justify its price tag. And with a dividend yield north of 2% and a streak of more than 60 consecutive years of payout hikes, it remains a quintessential “sleep well at night” stock.

The Value Meter rates Colgate-Palmolive as “Slightly Undervalued,” making it an attractive buy for investors who appreciate boring but profitable businesses.

If you have a stock that you’d like to have rated by The Value Meter, leave the ticker symbol in the comments section below.

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One such company is Kimberly-Clark (NYSE: KMB), the consumer staples giant behind iconic brands like Kleenex, Huggies and Cottonelle. This dividend dynamo has been a reliable wealth compounder for generations, so I decided to put it through my Value Meter.

To begin with, let’s examine Kimberly-Clark’s valuation.

The company currently trades at an enterprise value-to-net asset value (EV/NAV) ratio of 48.7. At first glance, that may seem astronomically high compared with the average EV/NAV of 6.8 among similar companies.

However, when we consider Kimberly-Clark’s extraordinary cash generation capabilities, its valuation becomes more justifiable.

Last year alone, the company grew its free cash flow by almost 50% – from under $1.9 billion to nearly $2.8 billion.

Even more impressively, over the past four quarters, the company’s free cash flow averaged an astonishing 745.9% of its net asset value. To put this in perspective, the average for companies with a similar cash flow history is a mere 8.6%.

In other words, Kimberly-Clark has generated cash relative to its net assets at a rate nearly 100 times that of its peers.

Put simply, it’s in a league of its own.

This robust cash flow is the driving force behind Kimberly-Clark’s remarkable dividend track record. The company is a proud member of the “Dividend Aristocrats” club, an elite group of S&P 500 companies that have raised their payouts for at least 25 consecutive years.

But Kimberly-Clark has far surpassed that threshold. It has an impressive streak of 53 years of uninterrupted dividend hikes. The stock currently boasts a forward dividend yield of 3.5% and a manageable payout ratio of 65.8% of forward earnings, so it has ample room to continue its dividend growth.

And the company’s latest quarterly results only strengthen the bullish thesis.

In Q1 2024, Kimberly-Clark reported net sales of $5.1 billion and organic sales growth of 6%, which was driven by a combination of price increases and volume gains. Additionally, gross margins expanded year over year to 37.1% thanks to strong operating leverage, productivity improvements and lower input costs.

Diluted earnings per share (EPS) also jumped 14% year over year to $1.91, crushing analyst estimates.

Looking ahead, management has raised its full-year outlook, now projecting mid-single-digit growth in organic sales and low double-digit growth in EPS for 2024. And its “Optimize Margin Structure” initiative, which aims to digitalize the supply chain and boost efficiency, is expected to generate more than $3 billion in gross productivity and $500 million in working capital savings.

If successful, these efforts should help mitigate any short-term headwinds.

The company’s latest results and its optimistic forecast showcase its ability to weather challenging market conditions while being proactive and staying ahead of the curve.

It’s also worth noting that the company is increasing shareholder value through brand acquisitions and share buybacks.

While Kimberly-Clark may not be a high-flying growth stock, it offers investors a rare combination of stability, income and long-term growth potential in an increasingly uncertain market. For patient investors seeking a reliable addition to their portfolios, it is a stock worth considering.

The Value Meter rates Kimberly-Clark as being “Slightly Undervalued.”

If you have a stock that you’d like to have rated by The Value Meter, leave the ticker symbol in the comments section below.

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Founded in 1987, Icahn Enterprises (Nasdaq: IEP) is majority-owned by billionaire investor Carl Icahn and his son, Brett Icahn. Shares of the company provide investors with exposure to Carl Icahn’s personal investment portfolio, which consists of public and private companies across a wide variety of industries – ranging from oil and gas to real estate.

Over the past several months, shares have fallen drastically, dropping as much as 65% from a 52-week high to a nearly 20-year low.

What was the catalyst for the collapse?

Last May, short seller Hindenburg Research released a scathing report on Icahn Enterprises. It claimed that the company was overleveraged, overvalued and paying out its fat dividends using money from new investors rather than its cash flows.

Naturally, the report scared investors, and it sent shares plummeting 20% the day it was published. A few months later, the company ended up slashing its dividend in half, pushing share prices down even further.

To add insult to injury, the company just announced a sharp decline in revenues in 2023 as well as an earnings loss, which is sure to discourage investors even more.

In short, the company’s shareholders have had a really tough year.

Icahn Enterprises’ revenues have tended to fluctuate over the past several years, and profitability (as measured by EBITDA, or earnings before interest, taxes, depreciation and amortization) has been inconsistent.

But the company’s free cash flows have been in a strong uptrend in recent years.

Free cash flows reached a whopping $3.4 billion in 2023, up 379% from $717 million in 2022 and up 21,356% from $16 million in 2021.

Among the more than 3,600 stocks scanned by my updated system – which I introduced in last week’s Value Meter – Icahn Enterprises falls between one and two standard deviations above the average. (Remember, the higher a stock’s ranking, the more undervalued it’s likely to be.)

The ratio of the company’s enterprise value to its net assets, or its EV/NAV ratio, is about 1.4. That means its acquisition cost is only 40% above its net asset value. (An EV/NAV ratio of 1.4 is about one-fourth of the average for all eligible stocks that were screened – that is, stocks with positive cash flows and net assets.)

Plus, Icahn Enterprises’ trailing 12-month free cash flow was an average of 32% of its net assets over the past two quarters, compared with an average of 26% among eligible companies. In other words, it generates more cash from its assets than most companies would.

Overall, the stock appears to have been beaten down too harshly.

Icahn Enterprises represents a very diverse investment portfolio with stakes in businesses across nearly every industry. While it’s not quite a high-flying growth stock, its sizable free cash flow growth in recent years shouldn’t be ignored – especially at today’s market prices.

The Value Meter rates shares of Icahn Enterprises as being “Slightly Undervalued.”

As always, if you have a stock that you’d like to have rated by The Value Meter, leave the ticker symbol in the comments section below.

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