Poker in the stock market: Aspen, Pets At Home, Microsoft and Medifast

ELCHE. The portfolio proposed by Gesem AV is spread out into different sectors where there will be significant growth in the next few years, along with a few rising margin rates that help them cope with complex situations such as the current one.  

In the technological sector we propose a company that is not very well known, it is called, Aspen Tech, which despite being in this sector, we think that it has been somewhat penalized as a result of the fact that a large part of its client portfolio is involved in the energy sector. We have also included Microsoft in this sector. 

Another sector that we like a lot is that of the pet world and to be precise the British company Pets at Home. There has been a lot of growth in this sector, margins are high and it withstands cycles such as those that have arisen during the current crisis extremely well. 

Finally, we are very positive about the sports, nutrition sector … and we have opted for the American company Medifast, from the nutrition and weight loss sector. 

Our proposal is as follows:


Aspen is the world leader in providing services that optimize the design of industrial assets (machinery, construction, installations) and inits operations and maintenance work in generally complex environments. Specifically, it uses sophisticated mathematic and machine learning models that it has been working on for 35 years. These models are intended to increase the competitiveness and the profitability of its clients by optimizing their production processes and by obtaining maximum efficiency with regard to energy consumption, production, time, the capital used… The objective of this company is to accompany the most traditional sectors such as the energy, chemical or the construction sectors-in general, companies from the industrial sector- in the digitalization process, so that they can significantly improve their margins without having to use a specific IT department for this. It currently has approximately 2300 clients all over the world in its portfolio.

Aspen earns money from the subscriptions that the clients pay for this optimization, the maintenance work to solve software problems or updates and other services that include training employees to learn how to use this software. 67% of its income comes from the licenses (subscriptions), about 28% from the maintenance service and the remaining 5% from other services. The licences are the most profitable part out of all given that the costs of these services amount to hardly 2% of its income, while the rest stand for 11% in the case of the maintenance service and with regard to the services last year it surpassed the cost of revenue, although normally there is a margin of between 10-15%. Furthermore, the highest growth is related to the licenses, which means that in general the company’s margins are increasing.

The fundamentals of the company are incredible: it has a gross margin of 90%, an EBITDA margin that is higher than 40% and a net margin that is close to 40%, with regard to the company’s returns, they are above the capital that is invested, more than 20% and some equity returns of over 50%. The growth of the company isn’t bad either, in the last four years it has had an average growth rate –not counting this one, of above 8%. The company’s multiples are much lower than those of the sector in general; it has been greatly penalized by the fact that many of its clients belong to the industrial sector, to be precise the energy sector, which have suffered considerably in this crisis.


It is a British company that provides veterinary services and sells pet care products. It has three main lines of business:

  • Pets At Home: It has a leading position in the pet care product retail sector in the United Kingdom. Very professional services are provided in its stores, customers are given advice on the products that are sold and it works with top quality brands, so its prices are higher than those on the market. To stop the customers choosing the cheaper products of its competitors in times of slower economic growth it has set up a VIP club with discounts for onlineand offline purchases, which has proved to be a success and it has gained it tremendous customer loyalty.
  • The Groom Room: This is the brand under which the group renders the ‘beauty’ services for pets (baths, grooming, brushing, and nail cutting…) Again they are leaders in the United Kingdom with 314 Groom Rooms. Highly trained pet grooming specialists work in these establishments. Something similar as what happens in the Pets at Home stores occurs here, the unique competitive advantage is the quality of the service.
  • Vet Group: The veterinary branch that works through two brands Vet4Pets and Specialist Division. These both supply the highest number of treatments or practices in the United Kingdom, more than 470 treatments, the majority of which are available at the Vet4Pets centres (464) and 4 of them are available at the Specialist Division centres that deal with more complex and delicate cases. This means that they can cover practically all kinds of animal pathologies. Unlike the more retail businesses of the group, this branch has not been affected as much a priori by the crisis because it provides essential services for pets and their owners usually spare no expenses for them.

During this crisis the company has demonstrated the strength of its business model and it recently announced an improvement in the sales forecast for the whole year, which has skyrocketed its stock market listing. From 2011 to 2019, sales have grown continually at an annual rate of 10%, for 2020, in spite of the current situation sales are expected to grow another 10% with an improved EPS of more than 25%, thus improving the net margin by 100 basic points and producing an FCF of more than 150 Million GBP, which stands for a conversion rate of 200%. 

At the moment the company is listed way above its all-time ratios (PER 12M by 30 times, Price/FCF by 12.6 times) but we think that the company’s strength demonstrated in this situation as well as the positive forecasts for the next few months justify them.


It is a North American company that is famous for its Windows operating system, one of its most successful products at present. However, not everyone knows about the variety of businesses that it is involved in and how well it is positioned in each one of them. The company divides its business models into: productivity and business processes, cloud computing and personal computer devices.

Firstly, there is the productivity and business processes branch; there is the Office 365 pack and its two versions, the commercial version and the consumer version, so a distinction according to the type of client is made, that is, between the company and individual. It also owns the social media site LinkedIn, crowned the leading social media site among professionals, whose revenue comes from the internal services of Talent Solutions, Marketing Solutions and Premium subscriptions. 

Finally, it has a business solutions pack called Dynamics Solutions that provides ERP and CRM services for companies. As we can see, the company is involved in practically all the daily activities of firms, from the Windows operating systems, internal communication and office automation tools with Office 365, human resources management with LinkedIn and business and resources management with Dynamic Solutions. This branch has had an annual growth rate of above 15% for the last 5 years.

The company also takes part in cloud storage and it tries to get involved in the IT departments or software development companies. The most outstanding products and services in this branch are the Azure cloud computing service, which supports the whole of this branch because the other products depend on it. Moreover, Microsoft supplies all kinds of services, from storage to cloud servers to leading development environments such as Visual Studio and version control platforms such as GitHub, which are also leaders in their field. This branch is the one that is growing the most, in 2015 its growth rate was hardly 5% and this year it is almost 30%.

Finally, Microsoft has its traditional branch of personal computer devices. It includes the famous Windows operating system, as well as its own brand of laptops Surface and other types of products and accessories such as headphones and intelligent devices. It also has a video game section where Microsoft sells its Xbox home video game console and all the income that is associated with it (subscription to be able to play online, video games, royalties, etc.)

They are very good branches of business, in which Microsoft has an excellent position. Furthermore, the weight of each of these branches is currently 33%, so it is perfectly diversified and ready to make the most of any trend. In the next few years the company’s annual sales are expected to grow at a rate of 11%, although by improving its margins, which will enable it to increase its profits. This will also mean better returns, which are currently above 20% in the case of ROIC and 40% in the case of ROE. It is therefore a company that focuses on the future, with an excellent financial position –it currently has a cash pile of 136 000 million and it generates more than 40 000 million FCF a year-, with margins that are expected to continue to increase while those of its sector are decreasing and it consistently pays out dividends every year.


It is a North American company from the nutrition and weight loss sector. It produces health and weight loss products that are sold online, though multi-channels and in leading franchise weight loss clinics. The concern about health and healthy lifestyles has grown tremendously in the last few years, proof of this is the way that the company’s accounts have evolved, growing by 66% in 2018 and 42% in 2019. For 2020 the increase in sales is expected to be above 22% with an improvement in the EPS of more than 35%, which has multiplied by more than 5 times since 2015. 

Despite this growth the company has managed to maintain the margins in the last few years, and in 2020 they are expected to improve by more than 200 basic points to reach an EBITDA margin of more than 16% and a net margin of almost 12%, an FCF of almost 100% of conversion compared to the net profit. In spite of this expected significant growth and its good behaviour on the stock market this year (+ it doesn’t trade at high multiples (PER 12M by 16.51 and by 13.53 for 2022, EV/EBITDA 2021 by 11 times). This is all with an enviable financial position, without debt and very high profitability ratios (ROCE>70%).

Sergio Serrano is the General Manager

and Kevin González is the analyst of Gesem AV

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