Dealmaker’s Diary: Why This $1.5B Stock Buyback Matters

Alpesh Patel|February 13, 2025

Would you be happy with a 20% annual return on your investment?

Most people would be.

But what if I sweetened the pot and said that was just the baseline…

That the same stock had the potential to double?

I’ve come across one such stock that looks to be grossly undervalued and often overlooked.

My discounted cash flow analysis says the stock trading at roughly half its fair value, making it a potential double.

And a $1.5 billion share buyback program will push the stock higher.

This is exactly the kind of opportunity we are looking for.

Let me walk you through the data that shows why this is our Stock of the Week.

This the kind of research my clients pay thousands for… but you get it for FREE as a Total Wealth subscriber.

Click on the image below to dive in.

Note: Want me to rate one of your stocks? Send the ticker to mailbag@manwardpress.com.

TRANSCRIPT

Hello, everyone.

The stock of the week, as you can tell, is Uber.

Just because a company is well known – even one whose services you use frequently – doesn’t mean it can’t be the Stock of the Week.

Uber is in the spotlight because it has been in the news recently. A leading hedge fund manager announced that he has been increasing his holdings in the company. So, I thought it was worth another look to determine if it should be our Stock of the Week as part of my Deal Maker Diary.

Let’s get right into it.

Uber is a company we’re all familiar with, and sometimes that familiarity makes us overlook important details.

Recently, Uber announced a $1.5 billion share repurchase program. That’s significant because even Warren Buffett considers buybacks a good use of company funds.

Repurchasing shares reduces the stock float, and since supply and demand drive pricing, fewer shares available typically lead to a higher stock price. Essentially, Uber is buying back and canceling its own shares, which is generally a positive.

Earnings are projected to grow – impressive figures for a company of this size.

• Market cap: $157 billion
• Share repurchase program: $1.5 billion

Uber has experienced turbulence in various cities and countries over the years, but it appears to be settling into a more stable phase. Personally, I use Uber services almost daily. However, you might be surprised to hear that I spend more on Lime bikes – owned by Uber – than I do on rideshare services.

Valuation & Growth Metrics

Uber’s value, growth, and income rating is 7 out of 10 based on our proprietary algorithm, which evaluates growth, revenue, valuation, and dividend yields.

• Forecasted P/E ratio: 22.7
• Classification: Technology company – not an automobile or rental company like Hertz
• Business model: Software company with a mobile app

A P/E ratio of 22.7 is relatively cheap for a tech company, especially considering Uber still has significant growth opportunities in untapped markets.

Uber has faced regulatory challenges, especially in cities like London, where it encountered pushback from local governments, unions, and regulators. Despite these hurdles, it survived, and I believe the worst of those regulatory battles are now behind it.

Financial Metrics

• Cash return on capital invested: 19.9% (significantly above the 10% threshold considered outstanding)
• Sortino ratio: 0.53 (measuring return versus downside risk; ideally above 1, but anything over 0.3 is solid)
• Volatility: Below 20% (medium-risk classification)
• Return alpha: Positive, indicating it has outperformed the market

Stock Projection

If Uber’s stock continues its past growth trajectory (2022-2024), we could see a 66% return.

• The stock appears to have a base around $52-$53.
• Surprisingly, it has relatively low volatility – beyond 2021, there have been no major price swings.

And here’s the key takeaway…

On a discounted cash flow basis, Uber is currently 51.7% undervalued, suggesting the stock has 100% upside potential if it corrects to its fair value.

Given the recent hedge fund activity and strong financials, Uber seems to have solid footing. There are plenty of positives here, which is why I chose to take a deeper look this week.

Thank you very much.