u/TheExpectationGap

CVS just reported Q2 and the numbers were better than I expected.

Revenue reached $98.9B, up 8.4% YoY, with growth across all three major segments. Adjusted EPS came in at $1.81, and management also raised its full-year adjusted EPS guidance to $6.30–$6.40.

The interesting part for me is Aetna. The insurance business has been one of the biggest problems for CVS because of higher medical costs, but margins are starting to move in the right direction. If that recovery continues, it could make a big difference to earnings over the next few years.

There are still obvious risks: medical costs remain high, debt is significant, and CVS has to prove that the improvement is sustainable.

I went through the Q2 numbers, risks and valuation in my latest video:

https://youtu.be/yLRvsQXpGBQ

Do you think CVS is actually turning the corner, or is the market getting ahead of itself?

AI assisted: Used AI to help with wording/formatting. The analysis and opinions are my own.

Mastercard just reported Q2 2026, and the numbers were strong:

• Revenue: $9.28B, +14% YoY
• Adjusted EPS: $5.04, +21%
• Adjusted operating income: +16%
• Operating margin: 61.1%, up from 59.9%
• Switched transactions: +9%
• Cross-border volume: +12%

What stands out to me is that earnings are still growing materially faster than revenue. Expenses increased 11% while revenue grew 14%, which pushed operating margins higher. That operating leverage is one of the reasons Mastercard has been able to compound earnings at such a high rate.

Another interesting point is the mix of growth. Mastercard's payment network revenue grew 10%, while value-added services and solutions grew 20%. So the story is increasingly more than just taking a small fee every time someone uses a Mastercard.

Cross-border remains another important driver. Volume grew 12% in Q2, and July data was still running at 11%. Non-US switched volume grew 12% versus 6% in the US, which shows how much of the growth opportunity remains international.

For me, the difficult part with Mastercard isn't the quality of the business — it's the valuation. A company with high margins, strong network effects and double-digit earnings growth deserves a premium, but at a premium valuation even a great business can produce mediocre returns if growth slows.

I went through the Q2 numbers, risks and my valuation in more detail here:

https://youtu.be/2oSbISMv8Gw

Would you buy Mastercard at the current valuation, or is the quality already fully priced in?
Disclaimer: AI-assisted. The analysis, assumptions, and conclusions are my own.

The market is asking a lot from Eli Lilly.

At $1,154.52, today's price only works in my model if cash flow grows about 26.2% a year for the next 10 years. Recently, reported FCF grew about 9% a year (FY2022-FY2025).

Even my bull case is only $854, below today's $1,154.52 price. That is a demanding hurdle. Either the company keeps outperforming for years, or the stock has little room for disappointment.

Is the market right to expect more, or is the stock priced for too much?

I broke down the full case in a video: https://youtu.be/A_r99DXwNBM

Snapshot: 2026-08-05. Disclosure: Position not disclosed. I built the model; video production is AI-assisted. Not financial advice.

My model says some optimism is already priced into PepsiCo.

At $139.56, today's price only works in my model if cash flow grows about 2.2% a year for the next 10 years. Recently, reported FCF grew about 11% a year (FY2022-FY2025).

The price is above my $117 base case but below my $189 bull case. There may still be upside, but the company needs to beat my central case to justify it.

Is there enough upside left for the risk?

I broke down the full case in a video: https://youtu.be/1i5q-vYW52o

Snapshot: 2026-08-02. Disclosure: I built the model; video production is AI-assisted. Not financial advice.

As of 2026-08-01, Amazon traded at $271.58. Under my reverse DCF assumptions, including a 10.3% discount rate and 2.5% terminal growth, the price implied roughly 54.6% annual FCFF growth for 10 years. Its historical 3-year revenue CAGR (FY2022-FY2025) was approximately +11.7%.

I valued Amazon using three lenses: a reverse DCF, a traditional bear/base/bull DCF, and a comparison with its historical P/E observations.

Under these assumptions, $271.58 sits above my $92.88 bull-case value. Either the model is too conservative or the price assumes stronger outcomes than my optimistic scenario.

The price-implied growth path is more demanding than the historical revenue growth rate, so execution matters.

The reverse-DCF result is assumption-dependent. A different discount rate, terminal-growth rate or starting cash-flow figure would produce a different implied growth rate.

See full analysis: https://youtu.be/UaR3ngKdGz4

As of 2026-07-31, Microsoft traded at $451.10. Under my reverse DCF assumptions, including a 10% discount rate and 2.5% terminal growth, the price implied roughly 20.3% annual FCFF growth for 10 years. Its historical 3-year reported FCF CAGR (FY2022-FY2025) was approximately +4%.

Full Analysis: https://youtu.be/niDt_lmRF4Q

I valued Microsoft using three lenses: a reverse DCF, a traditional bear/base/bull DCF, and a comparison with its historical P/E observations.

Key model outputs:

- Estimated unlevered TTM FCF (FCFF): $66.8B

- Bear case: $202

- Base case: $310

- Bull case: $368

Under these assumptions, $451.10 sits above my $368 bull-case value. Either the model is too conservative or the price assumes stronger outcomes than my optimistic scenario.

The price-implied growth path is more demanding than the historical reported FCF growth rate, so execution matters.

The reverse-DCF result is assumption-dependent. A different discount rate, terminal-growth rate or starting cash-flow figure would produce a different implied growth rate.

The valuation could be wrong if:

- Growth Saturation: The core market can saturate. When most target customers are already onboard, growth has to come from price — and price increases have a ceiling.

- Competitive Pricing Pressure: Cheaper competitors and AI-native challengers can force discounts, and every point of discount comes straight out of the free-cash-flow margin.

- Churn In A Downturn: In a spending downturn, seats get cut. Renewal-based revenue is durable — until budgets are not.

Which assumption would you challenge first: growth, margins, reinvestment, discount rate, terminal growth or competitive durability?

Production disclosure: I built the valuation model; editing and production are AI-assisted. Educational analysis, not financial advice.

ASML is clearly an exceptional business, but I wanted to understand how much future success is already reflected in the current price.

Using a reverse DCF, I estimate that the market is pricing in roughly 25.5% annual FCFF growth for the next ten years. That would increase FCFF from around $10 billion to approximately $97 billion.

My own DCF produced:

• Bear case: $513
• Base case: $841
• Bull case: $1,086

All three are below the current share price.

The strongest counterargument is ASML’s high return on invested capital. My normalized estimate is around 41%, suggesting that funding growth may not be the main constraint. The harder question is whether demand, capacity and execution can support the scale implied by today’s valuation.

I made a full video covering the reverse DCF, scenario valuation, multiples, stress tests and ROIC financing check:

https://youtu.be/lJzhrlnPRpY?si=4N7vjI9DY_zZp9tH

Which assumption would you challenge first: the growth rate, margins, discount rate or ROIC?

At the analysis date (2026-07-25), Adobe traded at $225.11. Under my reverse DCF assumptions, including an 11.9% discount rate and 2.5% terminal growth, the price implied roughly 0.7% annual FCFF decline for 10 years. Its historical 3-year reported FCF CAGR (FY2022-FY2025) was approximately +10%.

I valued Adobe using three lenses: a reverse DCF, a traditional bear/base/bull DCF, and a comparison with its historical valuation multiples.

Key model outputs:

- Estimated unlevered TTM FCF (FCFF): $10.3B

- Bear case: $291

- Base case: $407

- Bull case: $515

Under these assumptions, $225.11 sits below my $291 bear-case value. That is a large valuation gap, but it is not proof that Adobe is undervalued.

Historical reported FCF growth was stronger than the price-implied path, but it cannot simply be extrapolated across the modeled forecast period.

The reverse-DCF result is assumption-dependent. A different discount rate, terminal-growth rate or starting cash-flow figure would produce a different implied growth rate.

The valuation could be wrong if:

- Growth Saturation: The core market can saturate. When most target customers are already onboard, growth has to come from price — and price increases have a ceiling.

- Competitive Pricing Pressure: Cheaper competitors and AI-native challengers can force discounts, and every point of discount comes straight out of the free-cash-flow margin.

- Churn In A Downturn: In a spending downturn, seats get cut. Renewal-based revenue is durable — until budgets are not.

Which assumption would you challenge first: AI, growth, margins, reinvestment, discount rate, terminal growth or competitive durability?

Full analysis: https://youtu.be/vqOjeIVh8hk

Production disclosure: I built the valuation model; editing and production are AI-assisted. Educational analysis, not financial advice.

I run every company through the same three tests: a reverse DCF (what growth today's price implies), a traditional DCF (bear/base/bull), and a multiple check against the company's own history.

This is pure fundamental analysis - cash flows, growth and price. It deliberately ignores market sentiment, momentum and news flow, so it tells you what the price assumes, not where the stock trades next quarter.

Meta Platforms (META) at $600.91:

- Implied FCF growth (reverse DCF): 16% per year for 10 years

- Delivered FCF growth (history): 33.7% per year

- FCF (TTM): $48.3B

- Our fair-value range: $383 - $1,026, base case $673

- Verdict: REASONABLE EXPECTATIONS

The model uses an 11% discount rate and 2.5% terminal growth. If you think the market is right and the model is wrong, tell me where - that is genuinely why I post these.

See full video https://youtu.be/_JTv22NrhBs

Disclosure: my own valuation model; production is AI-assisted. Educational content, not financial advice.