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Posted September 19, 2025 at 9:59 am
We cover Baidu, Inc. (BIDU, rated ‘Hold’) and Lyft, Inc. (LYFT, rated ‘Overweight’) this week. BIDU has seen renewed investor interest over the past month with the company’s stock surging almost 8% yesterday after they announced an AI-related deal with China Merchants Group. The company has also reportedly started using internally developed Kunlun chips to train their AI models. LYFT saw its stock jump 13% yesterday after the company announced a partnership with Waymo to launch fully autonomous ride-hailing in Nashville from 2026.
EVA Momentum can be thought of as “Business Model Momentum.” It is very powerful in identifying the value creation of a firm. The ability to sustain extended periods of positive EVA Momentum is also key to share price performance. We seek out developed market firms with a market cap over $2bn that have a deep economic moat and have a favorable trend in EVA Momentum.
With the FED cutting rates, we wanted to look at Banks whose operating margins have tended to have a low correlation with the FED Rates – these are Banks with the ability to derive profit outside of their basic spread-based lending business. To this end, we calculated correlations between each U.S. Bank’s EBITDAR Margin (operating profit with EVA adjustments) and the FED Rate since 1998 (or for as long as the data was available for the Bank). We took the 25 Banks with the lowest correlations and categorized these as ‘low correlations.’ We provide a scoring summary for each of these names.
EVA Fundamentals for the global Automobile Components industry have been pressured since Q2 2024, but the global aggregate has seen strong YTD performance, driven especially by Chinese firms. If consensus projections are on the money, EVA Fundamentals for the industry may be close to a bottom at this stage.
We look at FOX Corporation (FOXA), a key player in the media landscape. The company reported a strong second quarter, with profitability driven by advertising revenues leading to EVA Momentum near record highs. We explore the firm’s EVA Drivers, Fundamentals, current Valuation, and ability to maintain sustained growth amidst a backdrop of negative future expectations. We also look at other large media, sports, and news entertainment firms in the U.S. universe and see how FOXA compares to its peers.
On average, Large Cap firms look unattractive in the PRVit model, as high Valuation scores are coupled with weak levels of Risk-Adjusted Profitability. EVA Margin has been pressured by negative top-line growth and a higher level of investments as a percentage of sales. EVA Momentum (growth) bottomed out in December last year, has gradually recovered, and is now close to turning positive, with investors’ belief in continued strong recovery reflected in elevated Embedded Expectations.
PRVit spreads were positive in Europe, the U.K., and Japan through the third week of September. Quality continued to struggle in most regions but was slightly positive in Europe. Cheap Value outperformed expensive Value in the U.S., AxJ, and Japan.
The global IT sector has reached the top end of the 10-year range in Future Growth Reliance, our P/E equivalent. FGR for all but the Energy sector is around 1 standard deviation above the mean. EVA Momentum needs to continue to improve from here to form any justification for having such elevated expectations. See our “Following the EVA Momentum” paper this week to identify firms that have been driving the improvement. It is not just NVDA or the Mag 7. The Future Growth Reliance (FGR) indicates the percentage of the market cap coming from investors’ expectations for future wealth creation (Future Value Added or FVA), above and beyond the current level of value creation.
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This material is from ISS EVA and is being posted with its permission. The views expressed in this material are solely those of the author and/or ISS EVA and Interactive Brokers is not endorsing or recommending any investment or trading discussed in the material. This material is not and should not be construed as an offer to buy or sell any security. It should not be construed as research or investment advice or a recommendation to buy, sell or hold any security or commodity. This material does not and is not intended to take into account the particular financial conditions, investment objectives or requirements of individual customers. Before acting on this material, you should consider whether it is suitable for your particular circumstances and, as necessary, seek professional advice.
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