Asmus Puhl Finance Blog

Markel Corp. (NYSE:MKL) our speciality insurance company reported Q3 2019 results which appear worse than they really are:

Operating revenue declined 9.1% from $2.236 billion in Q3 2018 to $2.033 billion this quarter.

Net income to shareholders declined much more. Down 49.8% from $409.4 in Q3 2018 billion to $205.6 billion this quarter.

But these declines can be explained by a change in accounting rules: adjustments to the fair value of equity securities have to be reported and integrated into the quarterly operating results. So, if the stock market has a volatile period this will be reflected by the reported numbers.

Knowing this it is not surprising that the much more important metric in the insurance industry the book value/share ratio actually rose 9.1% yoy to $768.98 !

At Markel’s investing operations, net investment income climbed 6.7% year over year to $113.4 million

At Markel’s insurance operations the consolidated combined ratio was 94% and earned premiums increased 9.3% to $1.3 billion.

At Markel Ventures the operating revenue grew 5.7% to $496.2 million and operating income jumped 50% to $35.5 million.

All this shows clearly that Markel’s long term success story continued this quarter as in the years before.

Markel’s stock today is valued at a price/book value per share of 1.5 , which is the „normal“ valuation of Markel’s stock in the last months, not cheap and not very expensive either.

Patient investors could wait and buy after the next market correction.

Shopify Inc. (NYSE:SHOP) just reported Q3 2019 results.

But before we start to have a look at the numbers, what does this company do?

Shopify is based in Ottawa, Canada, and provides a cloud based commerce platform for merchants of all sizes. It offers a single access to build an online shop, manage a physical retail location and enables clients to manage products and inventory, process orders, payments and ship orders.

Shopify’s stock already had an enormous performance since going public in May 2015 starting trade at $28. Yesterday’s closing price was $316.76 while hitting an all time high at $406 at the end of August 2019.

A big push for the company came in September 2015 when Amazon announced it would be closing its Amazon Webstore service for merchants, and had selected Shopify as the preferred migration provider.

Other big news came in this year when Shopify announced the „Shopify Fullfillment Network“ which allows merchants to outsource their packing, shipping, and delivery to Shopify.

By this announcement it became clear that Shopify really wants to be an e-commerce one stop solution for merchants and could eventually lure away third party sellers from Amazon. In the third quarter Shopify surpassed one million merchants worldwide on their platform.

But now have a look at recent numbers:

Revenue in Q3 2019 increased 45% year over year to $390.6 million, „beating“ their own guidance for revenue between $377 million and $382 million. Clearly, the growth story is intact.

But the company posted an operating loss widening from $31.4 million in Q3 2018 to $35.7 million this quarter. This reflects the cost of international expansion and building up the fulfillment network.

For the FY 2019 Shopify is raising its revenue outlook and now expects revenue between $1.545 billion and $1.555 billion.

This means that the growth story continues at an expected revenue growth rate of not less than 40% year over year.

Shopify’s stock is valued at a price/sales ratio of 26 which certainly implies strong growth expectations for the next years. Year to date the stock is up more than 130% .

As all elements are in place for Shopify’s continued growth story we consider this stock a buy with a time horizon of not less than 5 years!