On the four Ms, Brightspring Health Services earns 11 for management and 75 for moat. The management score rests on a return on invested capital of 4.8% and a gross margin of 11.8% — figures that describe capital earning less than it costs to employ. Debt sits at 1.44x equity. The solid moat and weak management are not the same judgement, and the gap between them is where the argument about this business sits.
Three independent anchors set the price worth paying. Growth is modelled at 15.0% a year, below the 18.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 30.0x. That produces an intrinsic value of $40.20, a 10-CAP price of $19.68 and a payback time price of $31.07, with the value zone set at the highest of the three, $31.07. Today's price of $57.26 is 84% above it.
The price is above the value zone and the business scores 75 for moat and 11 for management. Neither test argues for paying up here.
| Price | $57.26 |
| Market cap | $11.2B |
| P/E ratio | 42.7x |
| Return on invested capital | 4.8% |
| Gross margin | 11.8% |
| Debt to equity | 1.44x |
| Free cash flow yield | 5.2% |
| Growth rate used | 15.0% |
| Growth rate measured | 18.0% |
| Exit multiple assumed | 30.0x |
| Company | Moat | Buy price |
| Cooper Companies (The) (COO) | 59 | $53.35 |
| Biomarin Pharmaceutical Inc (BMRN) | 84 | $53.67 |
| DaVita (DVA) | 47 | $270.03 |
| Bio-Techne (TECH) | 50 | $17.73 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Brightspring Health Services rather than accepting ours.