Markets surged to fresh record highs mid-week on the back of July’s consumer inflation reading. The data increased expectations for a rate cut at the Federal Reserve’s September meeting. Trade sentiment also improved after President Trump extended the U.S.–China tariff truce for an additional 90 days.
While the tone in markets this week has been broadly optimistic, valuations remain elevated. The S&P 500 trades at valuation levels not seen since the dot-com crash.
Identifying stocks that combine strong fundamentals with cheap valuations should remain a priority for diligent investors. Our AI Agent is designed to screen for such opportunities by leveraging proven-superior data to produce more precise, transparent, and reliable signals.
The outperformance of the “Very Attractive Stocks Index”, which holds the stocks in the Bloomberg 1000 Index that get our Very Attractive Rating, is proof of the alpha our AI Agent produces in the market.
Our Long Idea this week highlights a company with industry leading-profitability, revenue growth across all business segments, record profits, and a cheap stock price.
Below, we present a large excerpt from our latest Long Idea report published this week, available to Pro and Institutional members. You can buy the full report a la carte here.
We’re not giving you the ticker for this pick, but we are happy to share our hard work because we want you to see how good our research is.
This stock offers favorable Risk/Reward based on the company’s:
- strong growth across both interest income and non-interest income segments,
- record high profits,
- industry leading capital ratios and profitability leader, and
- cheap stock valuation.
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Strong Business Operations and Fundamentals
This company leverages its diversified business model to continually grow its top- and bottom-line.
The company has grown revenue and net operating profit after-tax (NOPAT) by 10% and 11% compounded annually since 2014. See Figure 1. In each of the past three fiscal years, and the TTM ended 2Q25, the company’s NOPAT reached record highs.
The company improved its NOPAT margin from 21% in 2014 to 23% in the TTM while invested capital turns rose from 0.4 to 0.7 over the same time. Rising NOPAT margins and invested capital turns drive the company’s return on invested capital (ROIC) from 8% in 2014 to 16% in the TTM ended 2Q25.
Additionally, the company’s Core Earnings, a superior and cleaner earnings measure, grew 10% compounded annually from $22.2 billion in 2014 to $60.6 billion in the TTM.
Figure 1: Revenue and NOPAT Since 2014
Sources: New Constructs, LLC and company filings
Potential for 5%+ Yield
This company has paid $87.7 billion (11% of market cap) in dividends since 2019 and increased its quarterly dividend from $0.80/share in 2Q19 to $1.40/share in 2Q25. The company’s current dividend, when annualized, provides a 1.9% yield.
The company also returns capital to shareholders through share repurchases. Since 2019, the company repurchased $95.9 billion (12% of market cap) shares. During the first six months of 2025, the company repurchased $15.1 billion shares.
In July 2025, the company’s Board of Directors authorized a repurchase program of $50 billion. Should the company repurchase shares at the TTM pace, it would repurchase $25.7 billion of shares over the next 12 months, which is 3.2% of the company’s current market cap.
When combined, the dividend and share repurchase yield could reach 5.1%.
Strong Cash Flows Support Shareholder Return
Investors should take comfort in knowing this company will be able to afford to pay its dividends and repurchase shares due to its large free cash flow (FCF) generation. From 2019 through 1H25, the company generated $201.2 billion in FCF, which equals 25% of the company’s enterprise value.
Figure 2: Cumulative Free Cash Flow: 2019 – 1H25
Sources: New Constructs, LLC and company filings
This company’s $201.2 billion in FCF since 2019 is more than enough to cover its $183.6 billion in combined dividend payments ($87.7 billion) and share repurchases ($95.9 billion).
The company’s repurchases have also meaningfully reduced its shares outstanding from 3.1 billion in 2019 to 2.7 billion in 2Q25. See Figure 3.
We like companies that choose to return capital to shareholders instead of spending it on costly acquisitions or executive bonuses that rarely drive shareholder value creation. Companies that sport strong enough cash flows to consistently lower their shares outstanding offer excellent value.
Figure 3: Shares Outstanding: 2019 – 2Q25
Sources: New Constructs, LLC and company filings
…there’s much more in the full report. You can buy the report a la carte here.
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