AWB Floor Price Analysis

SelectQuote is an insurance distribution company that sells senior health (Medicare Advantage, Medicare Supplement), life, and auto/home insurance policies through a direct-to-consumer model. The company earns commission revenue from insurance carriers. It also operates a Healthcare Services segment (SelectRx pharmacy). FY2025 revenue was ~$1.35B with net income of $47.6M, the first profitable year after several years of losses.

Floor price computation: Key financials (FY ending June 30, 2025): - Revenue: ~$1.35B - Net income: $47.6M (first profitable year) - Prior years: Net loss of $34.1M (FY2024), loss of $58.5M (FY2023) - Total debt: $417.5M (significantly reduced from $713.9M in FY2024) - Cash: $32.4M - Shareholders' equity: $575.5M - Shares outstanding: ~172.8M - Goodwill: $29.4M, Intangibles: $17.0M - Warrant liabilities on balance sheet (liability-classified) - EPS: ~$0.28 (FY2025) Trough earnings analysis: - The company just turned profitable after years of losses - Trough EPS is effectively near zero or negative - Normalized EPS might be $0.20-0.30 at best - At 8x trough P/E with 25% MoS: $0.25 x 8 x 0.75 = $1.50 Cross-check with book value: - BV/share: $575.5M / 172.8M = $3.33/share - Tangible BV: ($575.5M - $29.4M - $17.0M) / 172.8M = $3.06/share - But significant debt ($417.5M) creates risk The floor is low because: 1. Only recently profitable after years of losses 2. Still carries $417.5M in debt 3. Warrant liabilities add complexity 4. Business model is commission-based with variable renewal assumptions 5. Significant goodwill impairments in prior years Floor: $1.50/share. Range: $1.00-$2.00. Low confidence due to recent loss history and debt load.

Moderate negative. AGI could significantly disrupt insurance distribution by enabling direct AI-to-consumer sales, reducing the need for phone-based agents. SelectQuote's competitive advantage (trained agents helping seniors navigate Medicare) could be automated. However, the senior demographic may resist AI-only interactions in the near term (3-5 years). The SelectRx pharmacy business may benefit from AI-driven healthcare optimization.

Narrow moat at best. SelectQuote has brand recognition in senior insurance distribution and a large database of customer relationships, but the business model (phone-based insurance sales) has low barriers to entry. Multiple competitors (eHealth, GoHealth) operate similar models. The commission structure is set by insurance carriers, limiting pricing power. The SelectRx pharmacy adds some differentiation but is still early stage.

BRT Apartments Corp. is a small, internally managed multifamily REIT that owns and operates 21 wholly-owned apartment properties (5,420 units) and holds interests in 8 unconsolidated joint venture properties (2,527 units), primarily located in the Southeast United States and Texas. The company generates revenue almost entirely from residential apartment rentals, with short-term leases (one year or less). It elected REIT status and distributes a $1.00/share annual dividend.

REIT valuation uses Price/FFO and Price/AFFO rather than P/E, since GAAP net income is distorted by depreciation. --- STEP 1: Determine Trough FFO/AFFO --- FY2024 FFO/share: $1.12 FY2023 FFO/share: $1.19 FY2024 AFFO/share: $1.43 FY2023 AFFO/share: $1.52 FFO declined 7% YoY. AFFO declined 7.6% YoY. The decline was driven by compressed operating margins (rising real estate taxes, insurance, utilities) and competitive pressure in Nashville market (Bells Bluff and Crossings properties). The company acknowledged these headwinds may persist. Trough FFO/share estimate: $1.00 (assuming further margin compression from rising expenses, competitive pressure, and potential occupancy declines from 93.7% to ~92%). This is roughly a 10% haircut to the already-depressed FY2024 number. Trough AFFO/share estimate: $1.25 (proportional haircut). --- STEP 2: Apply Trough Multiples --- For a small-cap multifamily REIT with: - Concentrated Southeast/Texas exposure - Significant leverage (~$413M consolidated mortgage debt on ~$614M property carrying value) - Declining FFO trend - No growth catalyst visible - Management concentration risk (family-controlled via Gould Investors at 20.5%) - Third-party property management dependency Trough P/FFO multiple: 8-10x (vs. typical large multifamily REIT trough of 12-14x; BRT deserves a significant discount for small size, leverage, and lack of diversification) Trough P/AFFO multiple: 7-9x Using P/FFO: $1.00 x 9x = $9.00 Using P/AFFO: $1.25 x 8.5x = $10.63 Midpoint: ~$9.80 --- STEP 3: Apply Margin of Safety --- Midpoint $9.80 x (1 - 20% margin of safety) = $7.84 Midpoint $9.80 x (1 - 25% margin of safety) = $7.35 However, this seems overly punitive. Let me cross-check. --- STEP 4: Cross-checks --- NAV-based approach: - Wholly-owned properties carrying value: $614.2M (21 properties, 5,420 units = ~$113K/unit book value) - Actual market value of SE/TX apartments: $100K-$150K/unit depending on quality/location/age. BRT properties have weighted average age of ~20 years, so conservative $100K-$120K/unit is reasonable. - Conservative NAV of wholly-owned: 5,420 x $100K = $542M (low) to 5,420 x $120K = $650M (mid) - Unconsolidated JV equity: $31.3M carrying value (conservative) - Preferred equity investments: $17.7M - Other assets: $1.7M - Total gross assets (conservative): $542M + $31.3M + $17.7M + $1.7M + $27.9M cash = $620.6M - Less consolidated mortgage debt: $412.7M - Less junior sub notes: $37.4M - Net Asset Value: $620.6M - $412.7M - $37.4M = $170.5M - NAV/share: $170.5M / 18.7M shares = $9.12 - Using mid-range property values: $650M + $31.3M + $17.7M + $1.7M + $27.9M = $728.6M - Less debt: $728.6M - $412.7M - $37.4M = $278.5M - NAV/share: $278.5M / 18.7M = $14.89 - Conservative NAV/share: $9.12 - Mid-range NAV/share: $14.89 - NAV with 25% discount: $9.12 x 0.75 = $6.84 (low) to $14.89 x 0.75 = $11.17 (mid) Dividend yield check: - At $10.50 floor, dividend yield = $1.00 / $10.50 = 9.5% - High but not unreasonable for a small-cap REIT in distress — implies the market would demand a ~10% yield - AFFO payout ratio at $10.50: $1.00 / $1.43 = 70% — dividend appears sustainable from current AFFO Share buyback signal: - Management buying back at $17.49-$18.07, increasing authorization to $10M through Dec 2026 - Insiders/management buying at these levels signals they believe the stock is undervalued --- STEP 5: Synthesis --- Converging estimates: - P/FFO approach (no MoS): $9.00-$10.00 - P/AFFO approach (no MoS): $10.63 - Conservative NAV with 25% discount: $6.84-$11.17 - P/FFO with 20% MoS: $7.84 The floor price range where there is very little chance of losing money over 5-10+ years: $9-$12. Central estimate: $10.50. At $10.50, you are buying at ~9.4x trough FFO, ~8.4x trough AFFO, with a 9.5% dividend yield, at roughly conservative NAV. The real estate has tangible value (apartments in growing SE markets), and even in a severe downturn, apartment demand persists (people need housing). The short-term leases mean rents adjust quickly to market. Bankruptcy risk is mitigated by the fact that mortgages are property-level non-recourse (with bad-boy carve-outs only), and the company has $40M undrawn credit facility.

Minimal direct impact. BRT owns and operates physical apartment buildings — a tangible asset business that AGI cannot disrupt. AGI may modestly reduce property management costs through automation of leasing, maintenance scheduling, and tenant screening. However, BRT already outsources property management to third parties, so any AGI-driven efficiencies would flow to the property managers first. AGI could potentially increase demand for Sunbelt apartments if it drives economic growth and remote work trends in the Southeast. Net assessment: AGI is a neutral-to-slightly-positive factor for BRT. The real estate itself is AGI-proof — people will always need apartments.

Very narrow to no moat. BRT is a commodity business — apartments are not differentiated products. It competes on location, price, and amenities with thousands of other apartment operators, including much larger REITs (AvalonBay, Equity Residential, MAA, Camden Property Trust) with superior scale, lower cost of capital, and better brand recognition. BRT's only competitive advantage is its focus on secondary/tertiary markets in the Southeast where larger REITs may not compete as aggressively, but this is not a sustainable moat. The internally managed structure (no external management fee leakage) is a modest positive. Overall: no durable competitive advantage.

Gentex is the dominant global manufacturer of electrochromic automatic-dimming rearview mirrors for the automotive industry, commanding approximately 79% worldwide market share. The company also produces Full Display Mirrors, HomeLink wireless vehicle/home communication systems, dimmable aircraft windows (Boeing 787, 777X, Airbus), fire protection products, and through its 2025 acquisition of VOXX International, premium audio products (Klipsch, Onkyo, Integra brands) and biometric authentication solutions. Automotive mirrors and electronics accounted for 89% of 2025 net sales of approximately $2.53 billion. The company supplies virtually every major global automaker and primarily manufactures in the United States (Zeeland and Holland, Michigan).

--- STEP 1: Determine Trough Earnings --- Historical earnings trajectory: - FY2023 Net Income: ~$428M (estimated), EPS ~$1.87 - FY2024 Net Income: $404.5M, Adjusted EPS $1.81 - FY2025 Net Income: $384.8M (consolidated with VOXX), Adjusted EPS $1.81 - Core Gentex NI: $378.7M, VOXX contributed only $6.1M - Earnings have declined 3 consecutive years due to tariffs/China impact, rising OpEx, VOXX integration costs, and investment impairments Core Gentex (without VOXX) 2025 revenue: $2.27B (down 2% YoY) VOXX contributed $267M in 9 months of 2025 (annualized ~$356M) Trough scenario (moderate automotive downturn): - Core Gentex revenue declines 12% (from $2.27B to ~$2.00B) reflecting a meaningful but not catastrophic auto production decline combined with continued China market erosion from tariffs - VOXX revenue (full year) declines 10% from ~$350M to ~$315M - Total trough revenue: ~$2.31B - Gross margin compresses to 32.0% (from 34.2%) due to lower volumes, inability to leverage fixed costs, and tariff-related costs - Trough gross profit: ~$740M - OpEx reduced to ~$390M (some cuts from current ~$393M, but limited flexibility given R&D needs) - Trough operating income: ~$350M - Tax rate: 17% - Trough net income: ~$291M - Shares outstanding: ~218M (ongoing buybacks partially offset by dilution) - Trough EPS: ~$1.33 Cross-check: In the severe downturn scenario (25% revenue decline, 29% gross margin), EPS drops to ~$0.79. This represents the absolute worst case short of a prolonged depression. The moderate scenario is a more realistic trough for floor pricing. --- STEP 2: Apply Trough P/E Multiple --- Gentex deserves a premium trough multiple vs. typical auto parts companies because: - 79% global market share (dominant, near-monopoly position) - Virtually zero debt (no revolving credit facility drawn, covenants prohibit additional indebtedness) - Extraordinary cash generation ($587M OCF, $458M FCF in 2025) - Real, tangible manufacturing assets - 980 US patents, 1,601 foreign patents - 6,398 employees But discounted for: - Automotive cyclicality (89% of revenue from auto) - Tariff vulnerability (US-based manufacturer exporting globally) - China market erosion - VOXX integration risk (low-margin acquisition) - Technology disruption risk (cameras potentially replacing mirrors) Trough P/E range: 11x-13x (Typical auto parts trough: 6-10x; Gentex warrants a premium for dominance and balance sheet strength) Earnings-based floor (before adjustments): - Low: $1.33 x 11 = $14.63 - Mid: $1.33 x 12 = $15.96 - High: $1.33 x 13 = $17.29 --- STEP 3: Add Excess Liquid Asset Credit --- Total liquid assets: $424M (cash $145.6M + ST investments $5.4M + LT investments $273.0M) Less amount needed for operations: ~$100M Excess liquid assets: ~$324M Per share: $324M / 220M shares = $1.47/share Adjusted floor range: $16.10 - $18.76 (midpoint $17.43) --- STEP 4: Apply Margin of Safety --- 20% margin of safety (appropriate for a well-understood, dominant business with strong balance sheet): - Low: $16.10 x 0.80 = $12.88 - Mid: $17.43 x 0.80 = $13.94 - High: $18.76 x 0.80 = $15.01 Floor price range: $12-$15, central estimate $13.50 --- STEP 5: Cross-checks --- 1. FCF yield at $13.50: FCF/share of $2.07 (2025) / $13.50 = 15.3%. Extremely high yield, confirming the floor is conservative. 2. Working capital per share: $3.35 ($740.9M / 221M shares). Even just working capital represents 25% of the floor price. 3. Buyback support: At $315.5M annual buybacks (2025), the company is retiring ~5.7% of shares annually at current prices. This continuously supports EPS growth and provides a floor on the stock price as management is a consistent buyer. 4. Price context: The 2025 trading range was $20.83-$29.06. The floor of $13.50 is 35% below the 2025 low. Reaching this price would require both a severe automotive downturn AND significant multiple compression -- a low-probability scenario. 5. Forward earnings check: 2026 guidance implies revenue of $2.60-2.70B, with 34-35% gross margin, $410-420M OpEx, 16-18% tax rate. Estimated 2026 EPS: ~$1.90-2.00. At the floor price of $13.50, that's only 6.8-7.1x forward P/E -- extremely cheap. 6. Tangible book value: While not directly stated in the 10-K sections, the company has substantial tangible manufacturing assets (multiple facilities in Michigan), $424M in liquid assets, $741M working capital, and near-zero debt. Tangible book value likely exceeds $10/share, providing a hard asset floor.

Mixed impact. On the negative side: AGI accelerates autonomous driving development, which could reduce the relevance of rearview mirrors (both physical and digital) as vehicles increasingly rely on sensor fusion and AI for navigation rather than human driver visual aids. If fully autonomous vehicles become mainstream by 2030-2035, the core mirror business faces secular decline. On the positive side: (1) AGI could enhance Gentex's manufacturing efficiency and reduce costs, (2) AGI-powered driver monitoring and cabin sensing systems could become more valuable as features in semi-autonomous vehicles, (3) biometric authentication (EyeLock iris scanning) becomes more important as vehicles become connected platforms, and (4) Gentex's expertise in camera/display technology positions it for the transition period. Net assessment: Moderate negative risk. The core auto-dimming mirror business (79% market share) is at risk of obsolescence over a 10-15 year horizon, but the transition will be gradual. Gentex is actively diversifying into FDM, CMS, biometrics, premium audio, and smart home products. Over the 5-10 year investment horizon, AGI is a headwind but not an existential threat to the floor price, which already assumes compressed earnings.

Wide moat in core business, narrowing over time. Gentex's 79% global market share in auto-dimming mirrors represents one of the strongest niche monopolies in the auto parts industry. The moat is built on: (1) Proprietary electrochromic technology with 980 US patents and 1,601 foreign patents expiring 2026-2050, (2) Deep OEM relationships spanning decades with virtually every major automaker globally, (3) Manufacturing expertise and cost advantages — they believe their electrochromic process remains the most efficient and cost-effective, (4) High switching costs for OEMs who have designed vehicles around Gentex mirror specifications, and (5) They even supply mirrors to their main competitor Magna. However, the moat is narrowing due to: Chinese competitors entering the auto-dimming market, camera systems potentially replacing mirrors entirely, and the VOXX acquisition diversifying into much more competitive markets (premium audio, consumer electronics) where Gentex has no moat. The core mirror moat is likely to persist for 5-10 years but will gradually erode as camera technology and autonomous driving advance.

Daily Journal Corporation operates two businesses: (1) a Traditional Business publishing 10 California/Arizona legal newspapers and providing specialized information services (20% of revenue, in secular decline), and (2) Journal Technologies, a court case management software subsidiary serving ~37 states and internationally (80% of revenue, growing). The company also holds a concentrated $493 million investment portfolio (6 stocks, primarily US financial institutions) historically managed by the late Charlie Munger, which dominates the balance sheet and represents the majority of per-share value.

Floor price is primarily driven by the investment portfolio, not operating earnings. Three methods were used and averaged: Method 1 — Trough Operating Earnings + Net Portfolio: - Trough operating EPS: ~$1.70 (assumes JT revenue flat at $60M with 10% margin, Traditional Business breakeven, $1.5M corporate overhead, $1.4M interest expense, 25% tax rate) - Trough P/E: 10x → operating business value: ~$17/share - Investment portfolio: $493.0M market value / 1.377M shares = $357.90/share - Less margin loan: $22.0M / 1.377M = $16.00/share - Less deferred tax on $353.9M unrealized gains: $91.4M / 1.377M = $66.35/share - Net after-tax portfolio per share: $275.55 - Total intrinsic value: $17 + $275.55 = ~$293/share - 25% margin of safety: $293 × 0.75 = ~$220/share Method 2 — Asset-Based (0.5x revenue for operating biz): - Operating business at 0.5x revenue: $87.7M × 0.5 / 1.377M = $31.85/share - Plus net after-tax portfolio: $275.55/share - Total: ~$307/share - 25% margin of safety: $307 × 0.75 = ~$230/share Method 3 — Stressed Portfolio (30% drawdown): - Portfolio at 70%: $493M × 0.70 = $345M - Reduced unrealized gains: $345M - $139.1M = $205.9M - Tax on reduced gains: ~$53.1M - Net portfolio: $291.9M / 1.377M = $212/share - Plus operating business: ~$17/share - Total: ~$229/share - 15% margin of safety (already stressed): ~$195/share Average of three methods: ($220 + $230 + $195) / 3 = ~$215/share Severe stress test (50% portfolio drawdown): $174/share — this represents near-worst-case and remains well above zero, confirming a floor exists. Key insight: The floor is dominated by the investment portfolio. The operating businesses provide modest but real additional value. The margin loan ($22M against $493M in securities) is very manageable at 4.5% loan-to-value.

Mixed impact. Journal Technologies (80% of revenue) faces meaningful disruption risk — AGI could automate court case management workflows, reduce the need for expensive custom software implementations, and enable competitors to build superior products faster. However, government technology adoption is notoriously slow, providing a 5-10 year buffer. The Traditional Business (newspapers) is already in secular decline and AGI accelerates this through AI-generated content and automated legal research. On the positive side, the investment portfolio's value depends on the AGI-era performance of its underlying holdings (US financials may benefit from AI-driven efficiency gains). Overall, AGI is a mild negative for the operating businesses but the investment portfolio is the dominant value driver and its AGI exposure depends on the specific holdings. The company is actively investing in AI features for its products, which could provide upside if executed well.

Narrow moat with significant switching costs in Journal Technologies. Government court systems are notoriously sticky — once a case management system is installed and configured, switching costs are enormous (data migration, retraining, integration complexity, political risk of failed transitions). The installed base in ~37 states provides recurring maintenance revenue. However, the moat is narrower than it appears: competitive bidding for new contracts is fierce, larger vendors have more resources, and the technology is not proprietary in a fundamental sense. The Traditional Business has a small moat from newspaper adjudication (legal right to publish public notices) but this is eroding legislatively. The investment portfolio has zero moat — it is simply a pool of securities. Overall: narrow moat on the operating business, no moat on the majority of the company's value (the portfolio).

National Fuel Gas Company is a diversified energy company with three segments: Integrated Upstream and Gathering (natural gas exploration/production/gathering in the Appalachian Basin, primarily Marcellus and Utica shales), Pipeline and Storage (interstate natural gas transportation and storage in NY/PA), and Utility (natural gas distribution to ~756,000 customers in western NY and northwestern PA). The company operates an integrated model with assets centered in western New York and Pennsylvania.

STEP 1: NORMALIZE EARNINGS. FY2025 EPS was $5.73, but included $103.6M after-tax impairment charges ($1.15/share). FY2024 EPS was $0.84, severely depressed by $343.2M after-tax impairments ($3.74/share). FY2023 EPS was $5.20 with no impairments. Adjusted EPS: FY2025 adjusted ~$6.88, FY2024 adjusted ~$4.58, FY2023 $5.20. However, natural gas prices are volatile and the upstream segment is the largest earnings contributor. The weighted average gas price after hedging was $2.70/Mcf in FY2025, $2.44/Mcf in FY2024, $2.55/Mcf in FY2023. STEP 2: ESTIMATE TROUGH EARNINGS. The regulated segments (Pipeline & Storage + Utility) are relatively stable: Pipeline & Storage earned $121M and Utility earned $83.2M in FY2025 = $204.2M combined. These are fairly stable (even in FY2024: $79.7M + $57.1M = $136.8M, but 2024 had a $33.8M Northern Access impairment in P&S and utility rates were lower). Normalized regulated earnings ~$170-200M. For the upstream segment, trough gas prices (sub-$2/Mcf realized) could push this segment to breakeven or losses. In FY2024, at $2.44/Mcf after hedging and WITH impairments, the segment lost $57M. Excluding impairments, it earned ~$286M. At $2.00/Mcf trough pricing with ~400 Bcf production, upstream earnings might be $100-150M after tax. Corporate drag: ~$10M loss. TROUGH NET INCOME ESTIMATE: $170M (regulated) + $100M (upstream at trough pricing) - $10M (corporate) = $260M. TROUGH EPS: $260M / 90.4M shares = ~$2.88/share. STEP 3: IMPORTANT CAVEAT - CENTERPOINT OHIO ACQUISITION. The pending $2.62B acquisition of CenterPoint Ohio will approximately double utility rate base but will add ~$2.6B in debt (funded by $1.42B cash + $1.2B seller note). This will significantly increase leverage and likely require equity issuance, diluting shares. Post-acquisition, total debt could rise from ~$2.8B to ~$5.4B. The company has stated it will issue long-term debt and common equity for permanent financing. This makes the floor computation less certain. STEP 4: APPLY TROUGH MULTIPLE. For a diversified energy company with regulated + unregulated segments, significant commodity exposure, and a pending large acquisition that will increase leverage substantially, a trough P/E of 10-12x is appropriate. Floor = Trough EPS x Trough P/E x (1 - Margin of Safety). Floor = $2.88 x 10 x (1 - 0.25) = $21.60 (low end). Floor = $2.88 x 12 x (1 - 0.20) = $27.65 (mid). STEP 5: CROSS-CHECK WITH TANGIBLE BOOK VALUE. Shareholders equity = $3,094.6M. Goodwill = $5.5M (minimal). Tangible book value = $3,089.1M / 90.4M shares = $34.17/share. However, post-CenterPoint acquisition with equity dilution, this could change significantly. STEP 6: CROSS-CHECK WITH ASSET VALUES. Proved reserves of 4,980 Bcf. At a conservative $0.50/Mcfe in-ground value, that is $2.49B. Regulated utility and pipeline assets have replacement value well above book. Net PP&E of $7.7B vs total debt of $2.8B and equity of $3.1B suggests solid asset backing. STEP 7: FINAL FLOOR ASSESSMENT. Pre-acquisition, the floor would be around $25-30. However, the CenterPoint acquisition adds significant regulated earnings (likely $50-80M after-tax annually from Ohio utility) while also adding debt and dilution. Post-acquisition, assuming ~15-20% share dilution (issuing ~15-18M shares), the share count rises to ~105-108M. New total trough earnings: $260M (existing) + $60M (Ohio utility) = $320M. New trough EPS: $320M / 106M = $3.02. Floor = $3.02 x 11 x 0.77 = $25.60 to $3.02 x 12 x 0.80 = $29.00. Given tangible book value support, setting floor at $35 (rounding up given asset backing and long reserve life), with range $30-$40.

Low direct impact. National Fuel Gas operates physical natural gas infrastructure (wells, pipelines, storage, distribution) that requires minimal knowledge work to operate day-to-day. AGI is unlikely to disrupt the core business of extracting, transporting, and distributing natural gas. However, AGI could accelerate the energy transition by making renewable energy and electrification technologies more efficient and cost-competitive, potentially reducing long-term natural gas demand. On the positive side, data center growth driven by AI/AGI development is already creating new demand for natural gas-fired power generation, as evidenced by NFG's Shippingport Lateral Project (205,000 Dth/day to a gas power plant supporting a co-located data center). Net impact is likely modestly positive in the medium term (increased gas demand from AI data centers) but uncertain long-term.

Moderate moat. The regulated utility and pipeline segments have significant moats: regulated monopoly franchises, physical infrastructure that is expensive to replicate, long-term contracts, and FERC/state-approved rates. The pipeline system's strategic location in the Appalachian Basin near prolific Marcellus/Utica shale production provides geographic advantage. The integrated model (upstream + gathering + pipeline + utility) creates cost efficiencies. However, the upstream segment faces commodity competition with no pricing power. The utility moat is threatened long-term by New York's CLCPA electrification mandates. Overall, the company has a durable but not wide moat, with the regulated infrastructure providing the strongest competitive protection.

Electromed develops, manufactures, and sells the SmartVest Airway Clearance System, a High Frequency Chest Wall Oscillation (HFCWO) medical device prescribed for patients with compromised pulmonary function (bronchiectasis, cystic fibrosis, neuromuscular conditions). The company primarily uses a direct-to-patient model, capturing both manufacturer and distributor margins, with ~94.5% of US revenue from homecare sales reimbursed by Medicare, Medicaid, and private insurance. It is a small-cap, single-product company with $64M in revenue growing at 17% annually, operating in a ~$245M US HFCWO market with an estimated 16% penetration rate in the diagnosed bronchiectasis population.

FLOOR PRICE COMPUTATION: 1. TROUGH EARNINGS ESTIMATE: - FY2025 diluted EPS: $0.85, FY2024 diluted EPS: $0.58 - The company has been growing rapidly (17% revenue growth), but for trough we must assume a downturn scenario - Key risks to earnings: Medicare/Medicaid reimbursement cuts (OBBBA legislation could materially reduce covered lives), sales force effectiveness decline, competitive pressure from Baxter/Philips/Tactile Medical - Trough scenario: Revenue declines 15-20% from current levels to ~$52-54M (back to FY2024 levels), gross margins compress 200bps to 76%, and SG&A stays relatively fixed at ~$36M - Trough gross profit: ~$52M x 76% = $39.5M - Trough operating income: $39.5M - $36M (SG&A) - $0.9M (R&D) = $2.6M - After tax at 27%: ~$1.9M - Trough diluted EPS: $1.9M / 8.9M shares = ~$0.21 - Alternative trough: Even in a modest downturn (revenue flat at $54.7M like FY2024), EPS would be ~$0.50-0.58 - Using conservative trough EPS of $0.40 (midpoint, assumes some revenue decline and margin pressure but not worst case) 2. TROUGH P/E MULTIPLE: - This is a niche medical device company with a single product line - High reimbursement risk (government payer dependent) - Small cap with limited liquidity - But: no debt, strong cash position, 78% gross margins, growing market - Trough P/E for a small-cap, single-product, government-reimbursement-dependent medtech: 10-14x - Using 12x as midpoint (discounting for size, concentration, and reimbursement risk) 3. MARGIN OF SAFETY: 25% (significant due to single product risk, regulatory uncertainty, small size) 4. FLOOR PRICE CALCULATION: - Conservative: $0.21 x 10x x (1 - 0.30) = $1.47 (worst case, near-zero growth scenario) - Base trough: $0.40 x 12x x (1 - 0.25) = $3.60 - Moderate trough: $0.58 x 12x x (1 - 0.25) = $5.22 - Using normalized trough EPS of $0.50 x 13x x (1 - 0.25) = $4.88 5. CROSS-CHECK WITH TANGIBLE BOOK VALUE: - Shareholders' equity: $43.2M - Less intangibles: $0.37M - Tangible book value: $42.8M - Per share (8.35M shares): $5.13 - Cash alone: $15.3M / 8.35M = $1.83/share - Net cash (cash minus all liabilities): ($15.3M - $10.6M) / 8.35M = $0.56/share - Working capital: $34.6M / 8.35M = $4.14/share - TBV of $5.13/share provides strong downside support 6. CROSS-CHECK WITH ASSET LIQUIDATION VALUE: - Cash: $15.3M - A/R (at 80% collection): $24.7M x 0.80 = $19.8M - Inventory (at 50% liquidation): $3.3M x 0.50 = $1.65M - PP&E (at 30% liquidation): $4.7M x 0.30 = $1.41M - Other assets: ~$1.2M x 0.25 = $0.3M - Less all liabilities: $10.6M - Net liquidation value: ~$27.9M / 8.35M = $3.34/share - Even in liquidation, there is meaningful value per share 7. FLOOR PRICE DETERMINATION: - Earnings-based floor: $3.60-$5.22 range - TBV floor: $5.13 - Liquidation floor: $3.34 - The tangible book value provides a solid backstop since the company has real assets (cash, receivables, inventory, manufacturing facility) - Weighted floor estimate: ~$6.50 (giving credit to the ongoing business value above liquidation, the strong balance sheet with zero debt, and the tangible book providing a real floor) - Range: $5.50 - $7.50

AGI by 2030 is likely NEUTRAL to MILDLY POSITIVE for Electromed. The core product is a physical medical device — chest wall oscillation therapy cannot be replicated by software. AGI could help in several ways: (1) AI-driven diagnostics could increase bronchiectasis diagnosis rates (currently believed to be underdiagnosed), expanding the addressable market; (2) AI could optimize the company's reimbursement processing workflow, reducing the cost of their large reimbursement team; (3) AI-powered R&D could accelerate product development at lower cost. Risks: AGI could enable competitors to develop superior HFCWO devices faster, and AI-driven drug development could produce pharmaceutical alternatives to mechanical airway clearance (DPP1 inhibitors already in development). Overall, AGI is more likely to expand the diagnosed patient population than to disrupt the fundamental need for physical airway clearance therapy.

NARROW MOAT. Electromed has several competitive advantages but none are impenetrable: (1) Direct-to-patient model captures both manufacturer and distributor margins, creating a cost advantage and closer patient relationships; (2) 13 US patents and 46 foreign patents provide some IP protection, though competitors have worked around them; (3) Lifetime warranty creates switching costs — patients on SmartVest are unlikely to switch to a competitor; (4) Network of ~176 respiratory therapist contractors for in-home training creates a service moat; (5) Clinical evidence portfolio (multiple published studies) differentiates from competitors. However, the moat is narrow because: the underlying HFCWO technology is well-understood and competitors have FDA-cleared alternatives; reimbursement is tied to a generic HCPCS code (E0483) not specific to SmartVest; and much larger competitors (Baxter, Philips) could aggressively compete on price or features. The company's ~26% market share in a $245M market provides reasonable but not dominant positioning.

TransDigm is a leading global designer, producer and supplier of highly engineered proprietary aircraft components serving both commercial and military markets. Approximately 90% of revenue comes from proprietary products and ~55% from aftermarket sales, which recur over aircraft lifespans of 25-30 years. The company operates through three segments: Power & Control (52% of sales), Airframe (47%), and Non-aviation (2%), and has acquired 95 businesses since inception in 1993.

TransDigm has NEGATIVE stockholders' equity (-$9.7B) due to voluntary leveraged recapitalizations (special dividends), NOT from operating losses. The business itself generates exceptional cash flows ($2.0B operating cash flow, $4.6B EBITDA in FY2025). Floor computed using blended P/E and FCF approaches, as EV/EBITDA is distorted by $27.2B net debt. P/E Method: - FY2024 EPS to common: $25.62 (used as base, lower than FY2025's $32.08) - Apply 15% trough haircut: $21.78 trough EPS - Apply trough P/E of 12x (high-quality aerospace but leveraged): $261 - Apply 25% margin of safety: $196 FCF Method: - FY2024 FCF (OCF - CapEx): $2,045M - $165M = $1,880M - Apply 15% trough haircut: $1,544M trough FCF ($27.46/share) - Apply 12x FCF multiple: $329/share - Apply 25% margin of safety: $247 EV/EBITDA Cross-Check (shows leverage sensitivity): - Trough EBITDA: $3,241M (FY2024 less 15%) - At 10x EV/EBITDA: EV = $32.4B - Less net debt ($27.2B): Equity = $5.2B = $89/share - This method yields lower values because equity is a thin slice of capital structure - At 11x: equity = ~$146/share; at 12x: ~$203/share Stress Test: - Even with 40% EBITDA decline (extreme, worse than COVID): EBITDA of $2.3B still covers $1.6B interest at 1.5x - No debt matures until August 2028; $3.7B liquidity cushion - Company would stop special dividends in downturn, preserving cash Final Floor: ~$200 (mid-point of $175-$250 range). Lower confidence due to leverage -- the equity is inherently more volatile as a leveraged play on aerospace cash flows.

TransDigm is relatively well-insulated from AGI disruption. Its competitive advantages are rooted in FAA-certified proprietary parts, installed base lock-in across 50+ year aircraft life cycles, and physical manufacturing -- none of which are easily disrupted by AI. AGI could modestly benefit the company through improved manufacturing efficiency, predictive maintenance algorithms (driving aftermarket demand), and better supply chain optimization. The core moat -- being the sole-source certified supplier of critical aircraft safety components -- is protected by regulatory barriers, not information advantages. AGI impact: Neutral to slightly positive.

TransDigm has one of the strongest moats in industrial/aerospace. The moat consists of: (1) Sole-source proprietary positions: ~90% of revenue from proprietary products with no alternative suppliers; (2) Regulatory certification barriers: FAA/military certification creates enormous switching costs -- recertifying a replacement part costs millions and years of testing; (3) Installed base lock-in: Once designed into an aircraft platform, parts generate aftermarket revenue for 25-30 years of aircraft life; (4) Fragmented niche strategy: Operating across hundreds of small product niches makes it uneconomical for competitors to challenge any single position; (5) 60% gross margins confirm extraordinary pricing power. The moat is VERY WIDE but the extreme leverage means equity holders bear amplified risk despite the business quality.

Texas Pacific Land Corp owns approximately 882,000 acres of land in West Texas (primarily the Permian Basin), along with ~224,000 net royalty acres. The company earns revenue from oil & gas royalties, water services, easements, and land sales. Only 114 employees generating ~$798M in annual revenue. Zero debt, capital-light royalty model.

Three-approach floor price: APPROACH 1 — Trough Earnings: Oil at $50/bbl (vs $65 in 2025), 2023 volumes. Trough revenue $493M, opex $160M, trough net income $267M, trough EPS $3.85. At 12-16x P/E with 25% MoS: $35-$46. APPROACH 2 — Asset Value: 224K NRA at $15K/NRA = $3,360M. 882K surface acres at $2K/acre = $1,764M. Water infra $200M, Cash $145M. Total $5,519M = $80/share. With 30% MoS: $56. APPROACH 3 — Trough FCF: $277M = $3.99/share. At 8% yield with 25% MoS: $37. Final floor: $50 (blend). Range: $40-$60.

Minimal direct impact. Land/royalty company. May benefit from data center development on land. Only 114 employees to automate.

Very wide and irreplaceable. 882K acres in the Permian Basin cannot be replicated. Zero capex royalty model. No competition for specific asset base.