Which stocks are likely to deliver a 10-fold return in 2025?

• High gross margin: Gross margin remained consistently above 90% from 2020 to 2024 (93.22% in 2024), primarily driven by the high added value of digital creative software and global expansion (over 90% of revenue from overseas markets, where gross margin is 3–4 percentage points higher than domestically). This metric aligns with Terry Smith’s criteria of “strong pricing power and low marginal cost.” • ROIC persistently negative: Although ROIC declined gradually from 2020 to 2023, it remained positive; however, in 2024, it turned negative at −5.2% (estimated) due to sharp increases in sales expenses (+17.42%), R&D expenses (+9.90%), and goodwill impairment (RMB 59.06 million), resulting in a net loss of RMB 163 million. A negative ROIC indicates the company fails to create value for shareholders—contradicting Terry Smith’s core principle of “long-term value creation.” • Deteriorating operating cash flow: Operating cash flow was positive every year from 2020 to 2023 (RMB 333 million in 2023), but turned negative at −RMB 120 million in 2024 (a 136% YoY decline), mainly due to increased cash payments to employees (+15.6%) and rising AI server costs (+65%). This deterioration signals mounting short-term liquidity pressure, undermining the company’s capacity to fund long-term investments. 2. Competitive advantages: Technology R&D and global presence are core strengths—but expense ratios remain excessively high. Terry Smith views “economic moats” as critical to long-term value. Wondershare Technology exhibits both strengths and weaknesses: • Heavy R&D investment: R&D expense ratio stayed above 27% annually from 2020 to 2024 (30.73% in 2024), totaling over RMB 1.5 billion cumulatively. Its proprietary multimodal large model “Tianmu” (covering video, image, audio, and text) has been integrated into flagship products such as Filmora and PDFelement; AI-native applications (e.g., Wondershare Virbo, SelfyzAI) generated revenue that grew 150% YoY in 2024. Such sustained R&D investment satisfies Terry Smith’s “continuous innovation” requirement—but raises concerns about the alignment between input and output. • Global presence: Overseas revenue accounted for over 90% annually from 2020 to 2024 (91.19% in 2024), predominantly from mature markets such as North America and Europe. This global footprint not only lifts gross margin (overseas margin exceeds domestic by 3–4 percentage points) but also mitigates single-market risk—consistent with Terry Smith’s “diversification” principle. • Excessively high sales expense ratio: Sales expense ratio remained above 48% annually from 2020 to 2024 (58.95% in 2024), largely attributable to intensifying competition (from giants like Adobe and Canva) and heightened marketing spend for AI product launches. This high ratio erodes profitability (sales expenses consumed 58.95% of revenue in 2024, while net profit was a loss of RMB 163 million), violating Terry Smith’s “low-cost, high-net-profit” criterion.

Strategic Financial Management

a) WH Group has established a pension fund for its employees. An independent third-party actuary estimates that the fund will yield an average annual return of 7.25%, and will reach RMB 150 million after 18 years. How much must WH Group deposit equally into this fund at the end of each year? b) WH Group’s long-term fixed-rate bond is priced at $1,275.20, with a face value of $1,000, a yield to maturity of 3.8%, and a maturity of 8 years. What is the bond’s coupon rate (with semiannual coupon payments)? c) Smithfield Foods currently has 8.15 million shares outstanding and expects next year’s net income to be $3.15 million. Its balance sheet (market values) is as follows: A) On March 15, the company announces a cash dividend of $1.35 per share, with the ex-dividend date on March 20. Under the assumption of a perfect market, what will be the stock price on the ex-dividend date? What will be the earnings per share (EPS)? B) If instead of paying a cash dividend, the company repurchases shares with the same amount, what impact would this have on the equity account? C) If Smithfield Foods pays neither a cash dividend nor conducts a share repurchase, but implements a 7-for-2 reverse stock split, what will the new stock price be? a) WH Group’s equity-to-debt ratio is 0.4. Its weighted average cost of capital (WACC) is 12.5%, and its after-tax cost of debt is 5.6%. The corporate tax rate is 25%. Calculate the unlevered cost of equity. b) Port Thompson plans to value WH Group’s common stock using the discounted cash flow (DCF) method. She estimates the firm’s free cash flow to the firm (FCFF) for Years 1–4 as follows: Year 1: RMB 55 million; Years 2–3: RMB 75 million per year; Year 4: RMB 115 million.

Smith+Nephew Keeps Outlook, Plans $500M Buyback as Revenue Rises

May 5, 2026

Smith+Nephew reported a 3.1% rise in underlying Q1 revenue to $1.5 billion, maintaining its annual outlook while announcing a $500 million share buyback amidst supply chain challenges.

reuters

2026-05-05

Smith+Nephew Keeps Outlook, Plans $500M Buyback as Revenue Rises

2026-08-03

Smith+Nephew Cuts Annual Revenue Expectations Amid US Orthopaedic Unit Weakness

2026-11-03

Smith+Nephew cuts outlook, confirms failed merger talks with J&J's orthopaedics unit

Smith+Nephew Keeps Outlook, Plans $500M Buyback as Revenue Rises

FAQ