Research
The rest of this site values companies. This section is for the questions that sit underneath a valuation and do not belong to any one issuer — the ones where the useful work is getting the measurement right before anybody argues about the conclusion.
Measure an oil shock by its price and you cannot see the largest one ever recorded, because in 1956 there was no price to see it with.
Why these are separate
A study like the one below would distort a company page. It is not about a business, it has no balance sheet, and its conclusions do not reprice anything. But it changes how you read a cyclical’s earnings, and it is the sort of thing worth having written down before the next headline rather than during it.
Each study publishes its own measurement rules, the figures behind every chart, and the places where the sources disagree with each other. That last part is usually the most informative thing on the page: where two reputable bodies give different numbers for the same event, the gap is normally a definition, and the definition is normally the whole argument.
Studies
Seventy years of oil shocks
Eleven episodes measured by barrels lost rather than by price — which is how the largest supply shock ever recorded turns out to be one the oil price never reported.
Open the study →US auto retail, eight ways
Eight listed retailers on one basis — because three accounting choices, not three different businesses, explain most of what the published multiples appear to be saying.
Open the study →What the oil study found
Three things, in short. The first is methodological and the other two follow from it.
- 1 Price is the wrong unit. In 1956, the Suez closure removed 10.1% of world crude production, the largest share ever lost — and the posted price did not move at all, because it was set by the oil majors rather than discovered in a market.
- 2 The size of the physical shock does not predict the equity outcome. Across the five largest supply losses in the record, the associated S&P 500 decline ranges from 48% at one extreme to none at all at the other.
- 3 What separates them is whether anyone could respond. Of 11 episodes, 4 landed on a world with no coordinated stocks to draw on. Those are the only ones where the oil price repriced and stayed repriced.
What the auto retail study found
A financial comparison of every listed US auto retailer of scale, on one consistent basis.
- 1 Six franchised dealer groups and two used-only retailers — $211 B of revenue and $118 B of market value between them, compared on valuation, business mix and what each has actually done since 2018.
- 2 The dealers are on single-digit earnings; the used-only pair are not. The six franchised groups trade between 6.3× and 11.5× EBITDA and 7.6× to 14.8× earnings, against 27.0× at CarMax and 31.0× EBITDA at Carvana.
- 3 The pandemic windfall is mostly given back. The group’s EBITDA margin ran from 3.9% in 2018 to 7.2% in 2022 and back to 4.9%. Earnings per share compounded anyway, at 14% to 22% a year, on buybacks.