Asmus Puhl Finance Blog

Only a few people expected less:

Shopify Inc. (NYSE:SHOP) released FY and Q4 2020 results that beat expections!

Reported revenue in Q4 jumped to $978 million, up 94% year over year.

Adjusted net income came in at $199 million which translates into adjusted earnings per share that soared 198% to $1.58.

Primarely those results were driven by “merchant solutions” revenue that jumped 117% to $698 million year over year in Q4 but also “subscription solutions” revenue grew an impressive 53% to $279 million.

Operating margin in FY 2020 for the first time swung to 3% from a loss and the sales / free cash flow margin came in at 13%.

And all this happened while Shopify continous to investing heavily in its future!

Shopify continued to build out its “Shopify Fulfillment Network”. 52% of eligible merchants in the United States and Canada already utilized Shopify Shipping in the fourth quarter of 2020.

They launched the all-new Shopify POS, a faster, more intuitive, and more scalable POS software designed to meet the needs of the more complex Brick-and-Mortar retailers and expanded Shopify Payments and the accelerated checkout Shop Pay.

Shopify’s stock was down after releasing these results, because Shopify tried to dampen highflying expectations for FY 2021:

“… the ongoing shift to ecommerce, which accelerated in 2020, will likely resume a more normalized pace of growth.”

But don’t forget that Shopify the past years has always been prudent with its outlook.

Shopify certainly has a bright future given the rapid change of commerce which will continue and the shift to ecommerce accelerated in an unprecedented way by the pandemia which will go on in a more normelized way.

But Shopify’s stock valuation reflects all these optimistic assumptions.

The stock trades at a price/sales ratio of about 56 and a mind blowing price/free cash flow ratio of more than 400!

But Shopify remains the top dog in an at least $78 billion small- to medium-sized business market and we all know how profitable dominant software provider can become over time!

Shopify remains a “buy” whenever there is a pullback in the market!

Markel released FY 2020 results!

At speciality insurer Markel Corp. (NYSE:MKL) earned premiums rose 11% from $ 5’049’793 in FY 2019 to 5’612’205 $ at the end of FY 2020

Book value per common share outstanding rose 10% from $ 802,59 to $ 885,13 at the end of FY 2020.

The combined ratio in FY 2020 was 98% after 94% in 2019 but in the fourth quarter 2020 Markel reported an improved combined ratio of only 89%, which even included four points of pandemic and catastrophe-related losses.

Markel’s insurance operations improved in a significant way:

“Our insurance operations delivered an underwriting profit for 2020 in the face of significant losses attributable to the global pandemic and the unusually high number of natural catastrophes as we benefited from capturing meaningful rate increases and new business in targeted growth areas globally, while exercising strong expense discipline,” commented Thomas S. Gayner and Richard R. Whitt, Co-Chief Executive Officers.

The investment return of Markel decreased 18% primarily driven by the impact of lower short-term interest rates on short-term investment income.

Net investment gains of $ 617,979 in 2020 were primarily attributable to an increase in the fair value of equity securities.

Looking at the private equity segment “Markel Ventures” operating revenue rose 36% to $ 2,794,959 thanks to 2 acquisitions in 2020 and operating income rose 51% to $ 254,078

Investors were pleased with these results. Markel’s share price rose 11% since the 2^nd of February when results were released.

The all important book value / share price ratio stands at 1.2 ,rather cheap for Markel which is normally valued at 1.5!

This low ratio reflects 2 problems Markel has in the current environment:

1. Today to find great businesses as acquisiton targets at acceptable prices for Markel Ventures is very hard!

2. Regulatory control of the way Markel holds and invests capital!

Therefore investors should not expect market beating results in the near future but over a time horizon of 5 to 10 years the picture could change materially.

Markel today is a „Hold“!