Pandora drops nearly 20% in one day. My stock buy of the week.
Novo Nordisk isn't the only Danish giant having a bad year
Scoot over Novo Nordisk.
You’re not the only Danish powerhouse getting pummeled by the market.
Make room for Pandora, a company on my Watchlist which dropped nearly 20% on Friday and is down 40% from its peak.
Summary
now some 40% below intrinsic value…
…despite fantastic ROIC, ROCE and profitability
and glistening valuation metrics
another great opportunity like UnitedHealth (UNH)?
Read on:
Down 18.4% on earnings miss
I published my first Watchlist last week.
As I put it together, Pandora (PNDORA) caught my eye.
It’s a holding of mine. The world’s biggest jeweller.
And not long ago, it was doing quite nicely.
Up 16% for me as of late June. But I noticed last week it was trending downward again.
And then Friday happened.
The company reported earnings that disappointed. By the end of the day, it was down nearly 20%.
Also by the end of the day, I’d bought more.
Love hate
Companies must hate quarterly earnings.
But I kind of love them.
Listed companies are required to give these short-term quarterly results.
And they shouldn’t be a big deal. Because you can’t really judge a company by one quarter.
But the market does.
And when there’s a big reaction - say a 20% one-day drop - it must drive companies crazy.
Like Pandora. A 40-year-old market-leader losing nearly one-fifth of its value. In a single day.
Doesn’t seem too fair to the company.
But it’s a great opportunity for investors.
Broken record
I feel like a broken record.
Reviewing the report, I see short-term challenges. But nothing much that changes the longer-term outlook.
So the price dip offers a great opportunity.
It’s the same thing I said all year with Novo Nordisk (NOVO-B).
This summer, I started saying this about Molina Healthcare (MOH) and the US healthcare sector.
And I think last week’s news about the healthcare sector was interesting. Berkshire buying UnitedHealth (UNH).
I’m guessing they sensed short-term market overreaction. Offering a great opportunity for anyone thinking longer term.
This is what I’m thinking for Novo and Molina.
And perhaps now for Pandora.
Stellar financials
Let’s just review Pandora’s financials:
80% gross margin
20% net margin
5-year ROIC around 25%
5-year ROCE over 50%
These are stellar.
And now let’s look at that earnings report from Friday:
8% organic growth
3% like-for-like growth
44% ROIC
reiterated full-year guidance
18% EPS growth in constant currencies
Ok sure, that LFL figure isn’t stellar. And single-digit organic growth isn’t eye-popping.
The company also highlighted tariff issues, which will hit those margins.
But an 18% drop - for a company that just increased profits by 18%?
Shouldn’t it be the opposite?
Feels comfortable
In any case, you now have the world’s leading jewelry producer at:
a PE of around 12
an EV/EBIT under 10
a FCF yield of 8%
down to a 52-week low
and 40% off its 52-week high
with a 40% discount to intrinsic value (according to AlphaSpreads DCF)
plus a dividend and buyback program
I suspect there will be more short-term drama. There usually is.
And it’s not quite my strongest conviction.
But a lot of other companies had a great week last week, while Pandora had a horrible one.
And there’s a lot here that makes me feel comfortable.
So I bought.
What are your thoughts?
Also, I’d love to hear your thoughts about the newsletter so far.
What do you like, and what would you like more of?
Thanks for any feedback.
And thanks for reading. Talk to you next week.
About me
Hi, I’m Joel Sherwood.
I analyze stocks and invest each week. And write about it all here. Building an equity fund for the long term. And trying to get good at this investing thing.
I’m a former financial journalist and current bank employee. I live in Stockholm, Sweden and started the Sherwood Investment Letter in January 2025.
Purchases are not recommendations.
Interesting situation, great returns trading near 52-w lows!