New Constructs' Live Podcast: Intelligent Capital Allocation - 27 October 2023

Thanks for joining us here at New Constructs weekly live podcast, Intelligent Capital Allocation. We've got a great group of folks for you here today, myself and Hakan, as well as Lee Mineta Kohler and Robbie Woodward from the analyst team. Here are our usual disclosures and disclaimers. And our agenda for today, the latest research ETF and mutual fund, both best and worst sector and style. It took me a long time to figure out how to get that as briefly as possible on this page. I was very proud of myself when it worked out. And Hakan, there was one more that just came out this morning that I will put on.

That was the dividend growth portfolio.

I'll get that link on this slide before I publish it on Society of Intelligent Investors. Then we'll be headed out to Society with Lee. There are several topics that we want to cover out there. I will be doing a brief intro of our new product today. We're very excited to share it with you guys as a little bit of a sneak peek. And then Robbie will be talking about ROIC and Lee will be talking about what's going on with Q3 filing season. The amazing fact that we are able to have 2 analysts here during filing season, it's very exciting. I really appreciate you guys. you guys taking a second because I know it is crazy busy.

We are both very happy to be here. Filing season is our busy time, but Kyle had to go to a wedding in Brazil and David's at a conference. This is maybe not as exciting as going to a wedding in Brazil, but he could just Zoom us in from the wedding party, right? Yeah, I'm gonna ask him about it.

I want pictures. I definitely want pictures.

Yeah.

And then Hakan will do the reverse DCF for us today. It's on Ethan Allen as well as round out with stock picks. So let's head out to society.

We wanted to start off by talking a little bit about the article that Robbie put up from the, I think it was from the Financial Times, from Professor Damodaran about ESG. If you haven't seen him speak or write about ESG and its impact on the investing community over the last decade or so, I think it's really worth reading this article. If you scroll down to the bottom there, Tam, you'll also see I linked a video of Damodaran talking at Baruch College about 6 months ago. It's a pretty long video. It's maybe an hour and a half, so 2 hours long. But if you've never seen him speak, it's a great opportunity to see him talk. He's a great teacher. What's interesting there about ESG is we've heard Warren Buffett say that the things that pass as innovation in the financial space are coming up with new ways to trick people or to distract them. And one of DeMottorand's points here is that ESG has perhaps started as a nice idea, but its promise of allowing people to make more money and also be good at the same time, it doesn't really pan out. And that it has ultimately served as a tool of distraction for people when fundamental data doesn't— when the fundamentals don't work out for a business deal or a company or an arrangement of some kind. Something like ESG is a way to get something to happen that you want to happen anyway, even if it doesn't necessarily work for the business. I think that's absolutely true. The other thing I think is that, and this is true in our business, and I think lots of businesses, is that things like KPIs are destiny. The way you set up and structure the way that you're measuring whether you've achieved your goal meaningfully impacts the kind of results that you get. So I think that ESG itself is a confusing cloud and mess that is constantly changing and hasn't really produced results in the industry. That's mostly served as a marketing tool. It's really interesting to hear Damodaran talk pretty negatively about it here. It sounds like he's been maybe doing it for a little while, but thank you, Robbie, for posting about it. I think he's always got great things to say. Do you have anything you want to add to that?

I'm happy to. I would just agree that it's A sales wrapper used by the streets to push investments that on a traditional fundamental basis probably are not as attractive as they're made out to be. I thought the article was very interesting when the professor talks about how this idea of ESG is amorphous. He was mentioning the metrics that are used to regard the return or the effectiveness of ESG has not been consistent throughout time. Whatever people are interested in, in the moment, Is what salesmen will provide for you. And so that movement is not doing a good job for investors. And so it's just something to be aware of when something's being pitched. And I think the SEC is also taking some action on funds specifically who have marketed ETFs or mutual funds as an ESG kind of product, but really there's no backing in the metrics or statistics that they're doing. I think Matt Levine has written about that in his newsletter from Bloomberg, which I would highly recommend if People have not read. A very interesting topic and interesting to see that the market is responding to the negative headwinds going on. The market's realizing that, hey, maybe this is just a sales gimmick and not as good as it's made out to be.

Yeah. Thank you for sharing it, Robbie. I think it's a great article and you're right. Finance people and financial engineers are good at engineering metrics that produce what they want. And if what they want is more sales, they're going to use ESG as a tool to generate more sales. One of Damodaran's points here is that the way that they're measuring whether or not that they're achieving their aims, it's hard to tell that the metrics themselves are not particularly robust or well understood, and that companies are really motivated to cheat these systems as much as possible in order to produce sales.

Right.

And also the story that making these kinds of decisions comes free. It's also something that Demodaran's pushing back against pretty robustly here. You know, it's likely that if you limit yourself and exclude opportunities that you may make less money. In fact, it's likely that you'll make less money. One of Demodaran's biggest points here is that yes, you can do those things, but you have to give up something else to do that as well. Maybe there's some higher return you have to give up there. But ESG has a promise that you can get higher returns. lower risk and do good in the world all at once. And that, that's just not realistic. We all wanted to hit on some other things here in society as well. Thank you to Giulio for talking about Cypher. I don't think anyone at New Constructs is particularly excited about Bitcoin. I imagine lots of you aren't as well. It's difficult. There's not a lot of fundamental information there going. There's not a lot of fundamentals behind what's happening in the space. I think that there's lots of very interesting technology in the blockchain space and in the Bitcoin technology, and that much of it has been undermined by the speculative nature of the market. And it's a little bit of a shame. But these businesses that are based on hopium, as Julio calls it there, I think he's exactly right. Again, this is another place that the market is really good at taking ideas and turning them into speculative opportunities for people and building up a lot of hype. So anytime you see those kinds of things, you need to be careful. I think Robbie said in that ESG comment too, that controlling our emotions is one of the hardest things we can do in being an investor. And I think he's right. Some other things we had on here was a question about Lucid, I think.

Yes, Lucid.

Yeah, Lucid is another company. They were on our zombie stock list and are on our shortlist, our most dangerous stocks list. They're off the zombie list now because they had a big cash infusion from the Saudi Public Investment Fund. So they've got enough cash that they can survive for quite a long time, but they're destroying value here. Their cash flows are negative. They've been negative for a while and there's not a lot of daylight at the end of this business, I think. If someone wants to spend a lot of money to help Lucid destroy value, here it is. But yeah, Julio's right on this one too. And the last one was that we had a request from someone about a DCF case study.

On ICL.

Yeah, we wanted to let Finaki know that we've added that to our list. We're not going to look at that one today. I think it's going to require a little bit of a deeper dive on our end. I think whenever I looked at it quickly, ICL is a company with, that's got a negative NOPAT right now and projected negative revenue growth in the first couple of years. We just haven't had the time to take a deeper look to see what's going on in the business there. So. We've added it to our list and we'll see if we can get someone to get to it here in the near future. Appreciate the questions. I know that those DCFs are really popular. I love them too. They provide a really clear guide to what kind of operational things need to happen in order to justify a company's stock price. So thank you all for the questions. But now let's swap over to you, Tam, and you can show us a little bit of what the new Stock Tracker 50 membership looks like and how folks can get access to it. Yeah, absolutely.

I know that the dev team has been hard at work on this over the past couple of months. So this is exciting. This is our homepage that you guys are familiar with. I wanted to show you a couple of pages where you can get more information. Go ahead and click on learn more. And this is probably the easiest way to learn more about the Stock Tracker 50 membership. On this page, you can get to a very brief video where I go through some of the features, and there's a short list down here of what you get as a part of this software package. That is the easiest way to learn more information. To give you guys a very brief tour, I'm going to log in as a Stock Tracker 50 member here. The 2 core tools that you will be able to use As a Stock Tracker 50 member are the ratings page, which I'll take you to here now. And as usual, you can look up any of the ratings, stocks, ETFs, mutual funds, anything under coverage. You can type in a ticker and you can get their ratings. You will see that the ratings are slightly different. You get the rating names. And also, if you can't remember the ticker, you can always look it up in coverage as well. This is actually something I discovered very recently and I was so happy to find it. If you're looking for some sort of like Johnson mutual fund, it'll search as you type. I find it incredibly helpful. You can do that on ETFs, you can do it on stocks, and you can do it on mutual funds. For me, you can also add to your portfolio from here, which I find super useful. But back to the ratings page, you can look up as many ratings as you want here. Going over to the portfolios page, you can get 50. Stocks in your portfolio at any one time. And this is an unlimited number of changes. So it's not 50 changes in the quarter. It is 50 at any one time. You add tickers in exactly the same way that you're used to here. You can add as many as you want. You can cut and paste from a CSV directly into the enter tickers area. And then of course you expand upon the rating to get to the rating We're really excited to make this available.

One of the pieces of feedback we got pretty consistently from our Gold and Platinum users is that they would like access to more ratings on more securities. This membership gives you access to an unlimited number of rating lookups on the ratings page. You can track up to 50 stocks, ETFs, and mutual funds in your portfolio. And with that email alerts badge at the top of the page, you can get emails anytime there's A rating change or an event. You can even change the emails that those things are sent to at the very bottom on. Yep. You get alerts about new companies we've added to coverage. Yeah, you can add a secondary email right there. This should be a great way for folks who are interested in a low-cost option to get access to the results of our new constructs research. It's a great way to see our ratings on everything. In the old Gold membership, you could only look at 25 things per quarter. Now you can look at over 10,000 things in a quarter and you can track up to 50 of them in your portfolio. We're very excited that that's the case. Some of the other things that were previously available to users are some of our model portfolios, like Most Attractive and Most Dangerous Stocks. Those things are still available à la carte. So if you click over on The research tab, Tam, or one of the other pages, you can click.

Into the shop.

Into the shop, purchase reports à la carte. Yeah. And you can buy subscriptions to our model portfolios there as well. If you were a Gold member in the past and you're interested in getting more access, you can sign up for this new Stock Tracker 50 membership. And if you are a Platinum member, this is half as much money as you used to pay on a monthly basis. You can still get access to the kinds of model portfolios that you previously had access to in your membership by signing up for them à la carte. So you can sign up for the ones that you are interested in and not pay for the ones that you aren't interested in. We hope this is a great way for individual or non-professional investors to get access to the kind of diligence that New Constructs is doing in a way that more meets people's needs.

There was a question in the chat. The price is $49 a month. You can prepay for the year and get an annual membership, and then it's whatever 11 times $49 is. I think that's $549.

I think so.

Yeah.

There's both monthly memberships as well as annual memberships. And if you have any questions, just email support. I'm happy to answer any of your questions. All right.

Thank you, Tam, for walking us through that. I also now want to introduce Robbie Woodward. He's been here at New Constructs for a few years and is one of our, the analysts on our model and ratings team. Part of his job is to help make sure that our models are the best that they can possibly be and that we're using all of our disclosures available in filings to always stay up to date with accounting rule changes, changes in practices, disclosures from companies, and anything else we can do to improve the quality of the data and the ratings that we send to you. We've had a number of analysts on in the past. I want to thank them. We've talked with Cole and with, who else did we have on recently? Adam. So happy to have more members of New Constructs come on here regularly. I think it's a great way to connect analysts with the folks who are using the models that they build. So Robbie, welcome aboard.

Thank you, Lee, for the introduction. Happy to be here and explain how to use our user website and provide some more detail about the research that we're able to provide to you, everybody here today. I wanted to talk about average invested capital. What it is and why it's important to start return on invested capital. Hopefully everybody's familiar with what this is, but in new constructs, we believe return on invested capital is the key metric to analyzing long-term shareholder value creation from a company. What it measures is how much money you are earning for every dollar invested into a company, and so that equation is looking at NOPAT. Over invested capital, NOPAT being the income statement side, invested capital being the balance sheet side. It's comparing those two things together, and there seems to be a lot of focus, especially from traditional Wall Street sell-side research, on making adjustments to the income statement side. Here at New Constructs, we provide diligence and do the due diligence required to make adjustments to both of those things because again, ROIC comprises of both of those. Inputs, and so it's just equally as valuable to be making adjustments and analyzing the balance sheet and getting it correctly or getting it correct as it is focusing on the income statement side. That's why I wanted to talk about invested capital side since it is kind of neglected by other people, other research firms, and there's a lot of due diligence that we do here at New Constructs to get that number correct for you guys. Average invested capital is important to use. When calculating ROIC, there's basically 2 forms you can have, which I'll talk about in the examples further down the line. But we want to be using average invested capital when calculating ROIC because the timing of new capital is important. Period over period, a company's invested capital can change drastically. I think the best example of that is related to acquisitions. So if a company has a large acquisition during the period, Obviously the invested capital can grow significantly, which will make comparing different periods' ROIC a little more challenging. Invested capital can also grow from organic growth. What we're really trying to focus on by using average invested capital and getting the number correct here in new constructs is the timing of that capital and its investment.

One of the things that traditionally happens is that folks are looking at NOPAT over invested capital at the end of the year. And that number can be misleading when the capital that's used to generate that NOPAT wasn't available, or the full amount of capital wasn't available all year to generate the NOPAT side. So we want to make sure that we get a good match between the income, that's the profitability. We want to get a good match between the income that's being generated and the assets that are used to generate that income.

Exactly what Lee said. That's important, the timing. We want to have the matching principle. We're matching the cash flows earned on the assets required to do so. In traditional DCFs and traditional sell-side research, they use the mid-year convention, which essentially is moving the assumption that all of the cash flow in your DCF, the assumption on traditional discounting is that all those cash flows are being received at the end of the year when you're discounting those cash flows. That obviously is not correct since the business is in operations for the full 12 months of their fiscal year. And so a compromise to get that number a little bit correct is they add an extra half to the discount period, which is called the mid-year convention, to assume that half those cash flows are being earned in the middle of the year. Here at New Constructs, we do a better job of that and actually time the actual changes of the period. So if a company has an acquisition, which I'll talk about in a second, in the first quarter, we're holding that company accountable For three quarters of the year, those assets earned invested capital—not just half—a shortcoming of traditional models that we have worked on. And like I said, the invested capital side is something that is not focused on as much. It's really more focused on the income statement and no cap side, which we think is a flaw of other research. To give a brief first example to hit home what I'm trying to explain today and the timing of the cash flows on invested capital. We have a fictional company, Company A, that has $1,000 of invested capital to begin fiscal '23. Company A then acquires Company B at the period end date of the first quarter in 2023 for $1 million. The 2023 Q1 invested capital in fact would be zero because Company A was not in ownership of Company B's assets during 2023 Q1. So Company A's invested capital would still be $1,000 at the end of Q1. So for the fiscal year, like I was mentioning before, because the acquisition occurred in Q1, we're only taking 3 quarters of that $100 and adding that to invested capital. So invested capital would be $1,075 at the end of fiscal '23 to match The revenue that they're earning on the invested capital when that acquisition was occurring. A real-world example here is ticker AAON. In 2021, we can see they had NOPAT of $58 million, and on the website you can see there are 2 invested capital numbers that are highlighted in green and red here at the end of 2021. So that first invested capital number is the invested capital at the end of the fiscal 2021 period, and that is $568 million. And then you can see underneath that is the average invested capital number, which is almost 50% less at $379 million. So that average invested capital number is what we are using when calculating ROIC. Again, to hit home the point. That is to match the revenue earned, and just so we can see what caused this jump in a second, to the invested capital that the company owned during that period. A large part of that increase was due to an acquisition that they had in November of 2021. AON's period end date is at the end of December, like most companies in the actual year. So we're only holding them accountable for this acquisition. An increase in invested capital for roughly a month and a half. That is why there's a big difference between the ending invested capital number, and as we can see, there is roughly a 50% difference in RIC. So that investment opportunity can look drastically different if we're only using the ending invested capital number versus the adjusted, which is accounting the timing of that invested capital change.

From that acquisition. Right. And on the NOPAT side, they only had the NOPAT generated from that acquisition from November, whatever that was, mid-November through the end of the year. So the company did not have an opportunity to generate income profits from that acquisition until they owned it. And so the NOPAT side is going to be what it is. What we're trying to do is match up the correct amount of capital that they used to generate that return.

That's correct. Another philosophy that we talk about here on the analyst team is using apples-to-apples comparison, and that's when we're talking about NOPAT to invested capital. So if we're making an adjustment to NOPAT, not necessarily making an adjustment in this case, but only accounting for the NOPAT for the month and a half after the acquisition towards the period end dates, we only want to be calculating the invested capital side using that month and a half of assets that they earned. Again, this can go from maybe a not very attractive investment, looking at the 10% using the ending invested capital, to a significantly larger or more attractive investment at roughly 15.5%. It's a 50% difference on ROIC, which is our belief, the main driver of shareholder value in the long term.

We find that Many of the things that we do on the model and ratings team are driven by basic principles like that. Like Robbie's apples to apples between NOPAT and invested capital. We want to treat all of the— we want to include all the assets and invested capital that are being used to generate profits for the business, and we want to make sure that there's a match between those things all the time. It's a simple idea. Sometimes the actual execution of those things can get complicated. And then the other thing is that using average invested capital like this gets us We found a more consistent ROIC for the company as well. Acquisitions can change the nature of the business, and so the profitability can change over time in general, and especially with acquisitions. But broadly speaking, we think that this gets us a better and a more consistent ROIC. So we don't see large swings as a result of acquisitions or large kinds of organic growth. The other thing I would note is that because we recalculate that ending period invested capital for each of the 4 quarters during the year, we also weight our end-year invested capital based on the regular growth of invested capital over the year. So we know we have 4 points during the year where we know what invested capital looks like, and we use that information to help us come up with the right answer for what average invested capital should look like over the year.

Yeah, thank you for bringing that up, Lee. That's some good additional detail. Some other additional detail, looking at other adjustments that we're making to invested capital during the time period is we're adding the after-tax Costs of the accumulated write-down expense. The purpose of that is to hold companies accountable for capital that they misallocated. So that's an investment they made and now are writing down the value of. Deferred compensation assets and deferred tax assets are viewed as non-operating assets. We do not include those in invested capital because a company's not expected to earn a return in the normal course of their operations on those assets. Operating leases we translate into basically being treated as debt, just like finance leases. So there shouldn't be any distinction between those 2 things in our philosophy because it's essentially a financing decision by the company, not related to the operations of the company and its normal course of business. And then we are stripping out hidden debt, which some companies will hide within Operating line items found in financial statements. So those are some other adjustments. Give a quick overview of what we're doing to invested capital to try to get that number correct and get the ROIC as correct as possible based on company financial filings and disclosure. Average invested capital is important. It provides us a better value and a better adherence to the matching principle of timing the cash flows. And earnings that the company earns to the capital required to do so. This is especially important when acquisitions occur because there can be a large change in the capital invested into a company when they make a large acquisition. And if we don't make these adjustments, then invested capital can be overstated and ROIC would be understated, making an investment look less attractive than it actually is. Focusing on the balance sheet is important. There are other adjustments we're making to invested capital outside of just accounting for acquisitions and the timing of those things that I just mentioned. And if anybody was curious more, they can check out the education section of our website where we have a lot more detail about the accounting of these things and changes, adjustments that we're making to invested capital and why we're doing those.

We do have one question. How do you account for stock options? Does it affect the balance sheet or income statement?

That's a great question. We actually are not making any changes to invested capital for stock options. What we do is we remove that from the corporate value to get the shareholder value in the DCF, because that is a liability that company owes to its employees that we view are higher up on the capital stack and should be paid first before paying The common shareholders. And to kind of talk about the NOPAT adjustment, we account for that as an operating expense for the company.

And before companies were required to report any ESO expense on balance on the income statement, we made an adjustment based on the information in the notes to calculate our own ESO expense. Robbie's right. We calculate an ESO liability and remove it from corporate value.

Yeah, but a great question. Like I said, that's something that Is the diligence that New Constructs kind of believes in, puts in, that's something that can be overlooked by other research analysts.

Speaking of which, it is 2023 Q3 filing season. It's upon us basically today. We'll be updating about 2,500 or more models over the next 2 weeks. This is an awesome opportunity for our clients and investors to check in on the status of their business, the businesses that they own. We're excited to do it. The technology makes it for us easier than ever. That's why Robbie and I can come and hang out with you this morning. Or this afternoon. We're excited to send this stuff out. So if you have tickers you're interested in, now is one of the times to pay attention. I know that companies do conference calls a little earlier, but we find that looking through the quarterly documents, the 10-Qs and 6-Ks we get from the SEC help give some additional information that's really important for building models. Hopefully everyone's prepared out there. Everyone's portfolio's ready. New data is incoming.

Exciting times.

We're gonna look at Ethan Allen Interiors today. It's an interior design company, manufacturer, retailer of home furnishings. This was also the featured stock in this week's Safest Dividend Yields Model portfolio, which is also a free report. So be sure to check that out. Also, the scenarios, the DCF model we're gonna go over. Is based on the $28 share price close, which was the Wednesday close. So it fell a little bit. And also there was a new filing that went in our system this morning. Regardless, we'll dive in. First thing I wanna point out is the price to economic book value, which is 0.5 for Ethan Allen Interiors. And what this implies is the market expects a The company's NOPAT to permanently fall 50%, whereas the company has actually grown NOPAT compounded annually in the last five years by 21%. And if you look at the last decade, it's been 9%. So seems overly pessimistic, but we'll jump in to our first scenario, which is going to be the neutral scenario. Don't let the name fool you; it's. Still pretty conservative. For the revenue growth part, we took consensus estimates. Consensus estimates have changed just slightly. Like I said, that's because of the new 10-Q that went in our system this morning. The scenario's based off of negative 7% almost in the first year, and then the second year is positive 2.3%. Which we keep still until the expected 10th year. For the NOPAT margin, it's going to be 9% for this scenario. It says it's before tax, but I made the cash tax rate zero. So this is actually the NOPAT number, and that's also going to be steady 9% for 10 years. And we can see what that implies for the stock price. When we go to the DCF review tab, we can see what this implies for the stock price in about 10 years in 2033. With these expectations baked in, the stock price would actually be $38.63, which is around $39. And that is actually a 38% upside from the $28 current price that was Wednesday's close. We can look deeper into it and see what the revenue and NOPAT is implied from that stock price. With this scenario, the operating revenue only grows at 1.3% compounded annually, and the ROIC with this scenario would be 12.6%, around 13%. But the ROIC of the company in fiscal 2023 was 17%, and even with the new 10-Q, the TTM is 15%. So we can see it's significantly lower even in this less conservative scenario. And also the NOPAT that I mentioned that grew 21% in the last 5 years compounded annually, in this scenario it would only be 3%. So that is far below what the company has achieved in the last 5 years and 10 years as well. That's the first scenario, conservative, but still there's a 38% upside. And then we'll look at a little bit more of a more conservative scenario. We'll keep the revenue growth the same. It'll be consensus estimates, but we'll drop the NOPAT margin to 16.8%. Also, I forgot to mention the 9% isn't just a random number. It's the 5-year average NOPAT margin of the company. And the 7.8 is the 10-year average NOPAT of the company. The 10-year average, we're gonna keep still for 10 years and we'll look at what that scenario implies. Like I said, a little bit more conservative to drive home the point that the stock is undervalued. When we look at this scenario, we can see that the implied stock price would be $33 a share. And that's still an 18% upside from the $28 current stock price. And actually the current stock price as of yesterday's close is $25. So even both these scenarios being as conservative as they are, there's even more upside. We'll also take a look at the ROIC and NOPAT implications that the stock price has. And we can see that the ROIC is only 11% in this case. Gonna make the same comparison. It was 17% in fiscal 2023, and with the TTM it was 15%. And the NOPAT compound annual growth implied is negative 4%. So even further below than what the company achieved historically. That's gonna be our reverse DCF scenarios for this week. I'll pass it back to you, Tam.

Okay, great. Hey, Hakan, there is one question. Was there a 0% cash tax rate?

Yes, I'll go over that. This cash tax rate, what this does is we multiply the before tax with the cash tax rate, and that gives us the NOPAT. But just to make it easier on the eye, I just made the cash tax rate 0. All that does is make the before tax and after tax the same value. So the no, the fore-tax margin is going to be the same with the no-PAT margin, just specifically in this scenario.

Yeah. Hakan's not suggesting that the tax rate's actually zero for each one out here. Yeah. He's just cheating and making the pre-tax margin equal to the after-tax margin by setting the tax rate to zero so that he can—

Yeah. As you can see, the, these are the historical tax rates and this is the estimated tax rate. So. Normally it would be that, and then you would find NOPAT just under here, automatically calculated.

Then one last question before we do just 1 minute of stock picks. Lee, can a stock have high ROIC and low WACC and still be a bad investment?

That's a great question and we should all know the answer to that one. That's something that we talk about extensively in our training program. The answer is absolutely. You can have a, you could have a 10,000% ROIC and be a terrible investment. Whether or not something is a good investment relies on of the stock price as well, right? Like any kind of asset, a company could be a good company, they can be very profitable, but if the expectations built into the stock price are so high that whenever you do a DCF analysis like the one we just saw Hakan do indicates that they have to do things that are impossible in the future to generate the cash flows they need to justify the current stock price, then it's a terrible investment. Hopefully that answers the question for you, but yes, ROIC is an important measure of profitability. an important measure of how valuable we think a company should be, but the market doesn't always agree. So good stocks, not always good companies and vice versa.

Awesome. Thank you, Lee. Thank you, Hakan. Thank you, Robbie, for joining us today. It was great to learn more about ROIC. That seems like a topic that is somewhat endless. I know it was tough to put boundaries there, so I appreciate it.

We could talk about that a lot. It's like I said, it's pretty important. As an analyst, it was, it was great to explain.

Thank you for your time. Thank you, Lee, for joining us. Good luck, you guys, the next 2 weeks. Let us know if you need it. We can bring you water, snacks.

Thanks, everybody. Have a great weekend. We'll take snacks.