Dino Polska SA (WSE:DNP) basic data, overview
Dino Polska is a Polish supermarket chain founded in 1999, which currently operates around 2500 stores and employs around 35000 people. It is headquartered in Krotoszyn, a vertically integrated company, meaning it also owns its own supply chain. National branding, meaning strong patriotism, helps with purchases. They also have their own brands and are constantly expanding in Poland, crowding out competitors, most notably the Polish version of Wal-Mart. It also publishes its reports in English.
Market capitalization: PLN 46 billion (USD 12.2 billion)
Investor Relations: https://grupadino.pl/en/wse/
📒Table of Contents📒
I have created a table of contents to make it easier for you to navigate the longer articles:
- Dino Polska SA (WSE:DNP) specialties
- How does Dino Polska SA (WSE:DNP) make money and what market advantages does it have?
- Dino Polska SA (WSE:DNP) metrics
- Acquisitions of Dino Polska SA (WSE:DNP)
- Dino Polska SA (WSE:DNP) management
- Competitors: Dino Polska SA (WSE:DNP)'s opponents
- What risks does Dino Polska SA (WSE:DNP) face?
- Dino Polska SA (WSE:DNP) valuation
- Major news and the last quarter
- Other interesting facts about Dino Polska SA (WSE:DNP)
〽️Market segment analysis〽️
In this section, I examine the dynamics of the market segment, how it operates, who the main players are, and what tailwinds or headwinds the players in the given market have to deal with. I will not analyze companies in depth, but I will touch on the market share of individual companies.
📈Dino Polska SA It is traded on the Polish – Warsaw – stock market under the ticker $DNP (or otherwise: WSE:DNP), but it is also registered in the USA as an ADR, you can find this paper under the ticker DNOPY. One thing to note: this is an under-analyzed stock, which is why few people know about it, so the liquidity of the ADR is also relatively low!📈
Dino Polska SA (WSE:DNP) is a Polish company competing in the retail market. The retail market has never really been attractive to me. It is very saturated, there is cutthroat competition, size really matters, low margins, poor returns. But then a few years ago I read the story of Amazon and Costco - let's sell something 20% cheaper, but get three times as much - and I understood the model of shared economies of scale and this made me realize that you can make a big splash in almost any market segment if your business model is good.
💡What is the shared economies of scale model?💡
The term likely originated with Nick Sleep and Qais Zakaria, investors at Nomad Partners. It is a strategy in which a company takes advantage of economies of scale and then passes those benefits on to its customers, typically by offering lower prices to gain long-term market share.
As Nick Sleep puts it:
“Most companies strive to achieve economies of scale, but few share it with others. We often ask companies what they would do with their unexpected excess profits. Almost no one answers that they would give it back to customers – how would Wall Street react to that?”
The idea that they could raise their prices and generate more profit with almost no negative consequences in the short term is very tempting, and many companies fail because of this temptation. However, those that can resist this become almost invincible to their competitors, as their competitive advantage increases proportionally with growth. Think of Costco or Amazon, but nowadays I could also mention financial services provider Wise and of course Dino Polska (WSE:DNP).
Let's turn back to Dino Polska SA (WSE:DNP) and the market.
☝️Retail is not a cyclical industry, as there is always a need for food, but recessions have a negative financial impact on consumers, who therefore replace their consumption with cheaper products.☝️
The market can expand roughly as much as the population growth. Also, as salaries increase, people tend to choose higher quality staple foods, so it works the other way around too.
In many cases, government intervention is typical, such as the introduction of price caps, support for the poorer classes, lower state taxation of certain foods. It is very typical of the industry that certain things are sold online - non-perishable, long-lasting products - but home delivery is also very popular. However, consumers do not order fresh goods very often, such as fruit and meat, which are typically purchased in person.
(I.e.The food industry sells FMCG products, meaning something that is always in high demand and has a high turnover rate. Typically, these include staple foods, beverages, meat products, vegetables and fruits, everyday medicines and medicinal products, pretty much what you would find in a supermarket.(I.e.
While this may seem like a homogeneous market, it is not at all. Most people purchase their food through multiple channels, just think about your own life:
- 🛒if you need something quickly, go to the Mom-and-Pop shop across the street
- 🛒if you want to do some shopping for a few days, you can walk to a medium-sized store (e.g. Aldi) 10-15 minutes away
- 🛒if you are planning to do some major shopping, you can drive to the supermarkets in the suburbs (Tesco, Auchan, Walmart), which are also 15 minutes away
- 🛒if you need non-perishable items that can be ordered in large quantities – e.g. oral care, chemicals, etc. – then order online
In other words, it appears to be a homogeneous market, but in reality it consists of many segments. The main characteristic of the companies listed here is economies of scale, as this is the only way to earn a lot in the market, this is a volume business. On what basis can individual department store chains differentiate themselves? They usually prioritize the following three things:
- 🤔based on price (who is the cheapest)
- 🤔based on product selection (SKU=stock keeping unit, i.e. product code)
- 🤔based on convenience (where is the store, how big is it, how difficult is it to find things in it)
It is important that companies cannot compete with their competitors in all three, so they usually highlight one or two, for example, Wal-Mart's slogan is: "Always low prices, always", meaning they wanted to be the cheapest supermarket chain in the USA.
In one of the articles I read a great example from the book Myth of Excellence (Fred Crawford & Ryan Mathews: Myth of Excellece) that consumers choose the place of consumption based on the following characteristics:
- AR
- accessibility
- the experience they gain while consuming
- product range (in this case, the number of SKUs listed)
- specialization of service that meets consumer needs
Based on the above, the individual food chains can be separated relatively well from each other. For example, the corner general store will be strong in accessibility, the large Auchan in product selection and other services, while Tesco will go for the lowest price, and so on. Based on these, we distinguish the following store types:
- hypermarkets (hypermarkets): huge, hub stores with a very wide selection of goods, many other services – e.g. clothes, technical goods, garden, toys, books, etc. – are concentrated. You have to go out here, wander around for hours, but they have pretty much everything (Wallmart, Costco).
- supermarkets (supermarkets): a store typically selling food and household supplies, with fewer related services.
- intermediate supermarkets (proximity supermarkets): a subspecies of supermarket, smaller stores selling everyday items and with a narrower selection, e.g. Aldi, Lidl are typically like this.
- discount chains (discounters): only the price matters, a disorganized mess, like 100 HUF and 1 EUR stores, mixed offerings (in the USA this is Dollar General).
- convenient stores (convenience): medium-sized, walk-in store, a few hundred square meters of floor space, you can find the basics here, it's good for daily shopping, you can get through the lines quickly (Tesco Express).
- franchise stores (soft franchise): There aren't many of these in Europe, but the essence is that the company only provides the format, or perhaps the equipment, and this determines the size and product selection.
- traditional (traditional, Mom-and-Pop): small stores operated on a family scale.
As you can see in the picture above, the number of traditional stores is decreasing, on the one hand the market is transforming, and on the other hand, in many cases in the still quite fragmented market, smaller stores are going bankrupt, or the younger generation is no longer interested in continuing the family business and therefore they close/sell the store.
The advantages of economies of scale can be supplemented with a few more thoughts. Although size is the most important thing, it is not unimportant that:
- ☝️Are these stores rented or owned (who owns the land and the store)?
- ☝️Vertical integration: does the supermarket chain have its own meat plant (e.g. Spar owns Regnum)?
- ☝️Who owns the transport fleet (rental or ownership, role of fuel prices, etc.)?
- ☝️Who owns the supply chains and distribution centers?
- ☝️Where do they get the energy they need to operate? Own source or public network?
- ☝️What is the product selection? Many products offer greater convenience, larger floor space, fewer products, easier management, and part of the range can also be solved with private label products.
There is another very important aspect: the location of the stores. This basically determines who goes there – what is their consumer power, who buys there, etc. – and how they arrive – by car, public transport, or perhaps on foot – these are all differentiating factors.
It is also typical of the market that every department store chain has some kind of loyalty program with which they try to retain consumers, and they prioritize their own brand - typically cheaper - products.
🌏The country – Poland🌏
I found it worthwhile to include some information about Poland in the analysis. According to the 2019 census, its population is 38.3 million, which, like other Central and Eastern European countries, is decreasing, due to emigration and a low birth rate, but there is also a significant influx due to the Ukrainian war in 2022.
According to 2023 data, the population is 41 million, so the negative trend seems to be reversing. The country has relatively few really large cities. Warsaw is the capital, which is about the size of Budapest, and the second largest is Krakow, with roughly 800000 inhabitants. The larger cities are almost all in the southern and western regions, due to the German and Czech economies, the average income of the residents here is higher, the pattern is very similar to Hungary. The country consists of 16 “voivodeships” in total, and its GDP is 689 billion USD, which was only 1995 billion USD in 142. That is, its growth is better - an annual average of 4% - than that of other countries in the region. It is the 5th largest economy in Europe in terms of GDP, but the country's purchasing power is roughly half that of Germany or the US. This also means that the population spends relatively consciously - that is, compared to how people in the USA do - and they pay more attention to what costs how much.
Based on the territorial distribution, roughly 40% of the population lives in cities and 60% in the countryside, but this also includes the suburbs. This is a particularly low number, the same in Germany is 80-90% in favor of large cities. If we look at similar developing countries, such as the Czech Republic and Turkey, the proportion of the urban population there is also 80-85%, so this number is high not only in Western democracies. Japan is a similar example, where 45 million people live in the metropolitan area of Tokyo, while the country's population is roughly 120 million.
Their social system is very similar to the Hungarian one, basic healthcare, school and similar social services are free, etc. The economy was hit by three major events between 2019 and 2022, firstly COVID, secondly the economic recession and the subsequent inflation (the maximum was around 15%), and then the Russian-Ukrainian war broke out on February 2022, 24. Although the country does not directly border Russia, it borders Kaliningrad (Königsberg) in the north, which is a Russian enclave, and Belarus, which is an ally of Russia. Naturally, it also borders Ukraine, which is why political tension is quite high. Since it is a resource-poor country, high fuel prices – roughly 3x compared to the US in terms of consumption power – have significantly pushed up inflation.
Poles are quite nationalistic, which is why they consume a lot of domestic products. Their diet includes a lot of meat - this is one of the biggest advantages in retail - which is naturally the easiest to obtain fresh from domestic sources. The European average in this regard is 69 kg/person/year, while the same is true for Poles: 76 kg/person/year. Since 60% of the population is “rural”, they often prefer nearby, local stores, especially if they are located in busy areas. There are two primary reasons for this, according to research by the University of Lublin analyzing consumer habits: convenience and freshness of products. Regarding the latter, 80% of the population thinks that locally produced “local farm-to-table” goods are of better quality and healthier. In other words, this applies mostly to meat, vegetables and fruit, but not so much to other consumer goods. COVID also helped to encourage visits to smaller stores, simply because people started avoiding larger crowds.
As for the Polish retail sector, the biggest competitors are the following (based on 2024 data):
- 🆚Ladybug (market leader, PLN 101 billion in 2024, owned by Jeronimo Martins, a Portuguese listed company, with 3730 stores in 2024)*
- 🆚Eurocash (PLN 32.24 billion in 2024), owns franchise chains. Loser!
- 🆚Dino Poland (PLN 29.3 billion in 2024, with ~2750 stores)
- 🆚Zabka Group, Zabka Polska, PLN 27.3 billion (as of 2024)
- 🆚Lidl (PLN 27 billion)
- 🆚Auchan, Kaufland, Carrefour, the rest compete for 5th place
Tesco (exited the market due to intense competition)
*Biedronka's revenues are more difficult to calculate because the Jeronimo Martins group reports its revenues in euros (EUR 33.47 billion) and Biedronka accounts for 70.4% of this, which must be converted back to zlotys, but we do not know the exchange rate used in accounting.
In 2015, Dino was only 8th on the list with sales of PLN 2.6 trillion, currently it is PLN 29.27 trillion. What could be realistic is the second place, or the competition for the first place with Biedronka and Zabka Polska. The market itself is terribly fragmented, full of small stores, whose place is slowly being taken over by the big ones.
🙋♂️Specialties of Dino Polska SA (WSE:DNP)🙋♂️
In this section, I examine what specialties the analyzed company has, what its position is in the market, and whether it does anything differently than its competitors. If so, what and how, and what impact does this have on their operations.
Dino Polska SA (WSE: DNP) is a proximity supermarket and discount chain that competes mainly in the categories of convenience and price. This also means that they build smaller than usual, approximately 400 square meters, uniform-format stores with 8-12 parking spaces, which are profitable after serving 2500 people, which they collect from a 2-kilometer radius.
That is why they basically open stores in smaller settlements, with around 5000 people, but not exclusively in such large ones, where due to the smallness of the catchment area, there is no room for another competitor, nor a hypermarket-sized store. They offer roughly 5000 products – with SKUs, which is the abbreviation for stock keeping unit – some of which are private labels. They spend very little on advertising – 0.2% of sales – because there is no competition locally, people practically pass it on by word of mouth when a new store opens. In contrast, Lidl counts on 20 people and a catchment area of 000 kilometers before one of its stores turns a profit, and they spend 10% of their total sales volume on advertising.
Interesting data, the increase in the number of stores:
- In 2017: 705 pcs
- December 2023: 2406 pcs
- December 2024: 2746 pcs (+13%)
- According to March 2025 data: 2752 pcs
This is a 13% increase in one and a half years, roughly 1 new store opening per day. Dino Polska's goal is to open at least 12 stores per 100000 inhabitants, and from this data it is not difficult to guess that this means approximately 2019 stores for the entire country - conservatively considering the 38140910 population of 4600.
The shops The peculiarity is that they always open in busy junctions, each of which has a fresh vegetable and meat counter. Since 2021, Biedronka has started to copy the DNP model, and they also operate meat counters in about 200 stores. Dino Polska SA (WSE:DNP) stores are 95% self-owned - Costco (CSCO), Wallmart (WMT) and Copart (CPRT) have done the same in their own markets, owning the land - they buy the land for construction and build the standardized stores themselves. These are typically located in suburban or rural areas, where land is cheaper, but they try to choose high-traffic junctions.
Dino Polska was founded in 1999 by Tomasz Biernacki, but in 2011 they no longer had enough capital to expand, so he took the company to an IPO in 2017, where the previous venture capitalists exited the company.
Biernacki has owned 51% of the shares ever since, he has never given or bought back shares, so it is a majority-owned company, let's say a family business. However, the Biernacki empire includes not only Dino Polska, but also several other business enterprises - e.g. online gaming, discos, and the like - and Dino Polska itself is vertically integrated.
In practice, this means that Biernacki's sphere of interest includes companies that do not operate under the name of Dino Polska, but serve it:
- Agro-Rydzyna: meat processing plant (practically a slaughterhouse)
- Dino Krotoszyn Meat Processing and Packaging Plant
- Krot Invest:: construction company that builds only Dino Polska stores
- Dino Oil sp. zo o.: company responsible for refueling and fuel supply of transport trucks
- They have 10 distribution centers, each serving 350-400 DNP stores, and they are currently building three more, which will be enough for about 4000 stores (Amazon logic, they did the same thing)
- production of private label products, which currently only accounts for 4.5% of revenues (but there is still room for margin growth here)
The Biernacki empire basically grew out of meat processing, their first slaughterhouse opened in 1993, and in 1998, when they opened the first DNP store, they were already processing 25000 tons of meat. The bottom line from the above is that they own one of the most important and highest-margin businesses, they own the supply chain, the processing plant and the distribution center. They are solving the construction with their own resources, so they don't have to bargain with the builder, there are no delays, no other contractual disputes, and no rent.
The cost of building the store will be recovered in about 9 years – although I have read 3 and 4-5 years, but I stick with the conservative 9 – which shows that the company is planning for the longer term. I would like to note here that if the real estate market takes a hit and prices fall, it could lead to write-offs on the accounting side – it would appear as a loss – which could cause EPS to fall (this is a technical issue for me, because in the long term, real estate prices rise, but another “2008” could undercut the numbers, so we need to pay attention to it).
💡In addition to the above, most stores have had solar panels on their roofs since 2019, which provide electricity to the stores (no small feat given the significant cooling capacity), which represents 2476 MW of power across 99 stores and generated 87 GWh of energy during the year.
In contrast, competitors typically rent their stores and do not have vertically integrated stores to serve them, which is a huge competitive disadvantage in the long term. This is also evident in the company's metrics, which I wrote about in the relevant section, but the point is that building stores is quite capital-intensive, which is why Dino Polska SA (WSE:DNP)'s free cash margin has been negative -1.5-4% - over the past few years, while Biedronka's is positive, somewhere around 3.5-4.5%. Of course, their ROA values are exactly the opposite, 10-12% for DNP and 4-5% for Biedronka, meaning that building stores pays off in the long term, and the same is true for ROC, the former is 16-18%, the latter is 8-12%.
The stores also feature a large product range, reportedly able to carry 5000 SKUs in a single Dino Polska store, which is a larger selection than its competitors. However, none of their suppliers account for more than 5% of their revenue, so they have little bargaining power against Dino.
🛒Total Available Market Size (TAM)🛒
Regarding the rapid growth in the number of stores, I wondered how long the store density could continue to increase. The company claims that they want to achieve a store density similar to that in the western half of the country in the east, while the annual growth of the market is about 6%.
🧺Based on the fact that Biedronka's 3730 stores generate PLN 101 billion, while DNP generates PLN 29.7 billion with 2500 stores, and the market is consumed by these companies together, I think the density should stop at a maximum of 7-8000 stores in the case of Dino Polska SA (WSE:DNP), which is a three-fold multiplier compared to the current number of stores.🧺
This was supported by several sources, adding that there is certainly no room for more than 15-20000 stores in the Polish market. This also means that the upper limit for Dino's stores could be much lower, 5-6000.
According to my own calculations, which are based on the data that the maximum store density occurs at around 3000 inhabitants/store, and we know that a DNP store becomes profitable after 2500 people, if we assume that the entire population was covered by DNP, then 38m/2500=15200 stores, which would mean all stores of ALL stores, so I think the maximum number of stores will be closer to 5-6000 than to 7-8000. If I calculate the same for the 2023 data, which is 41 million people, then 41 million/2500=16400 stores, assuming that companies do not steal market share from each other and no store closes. This is true for DNP, because they have NEVER closed a store. I would like to note that the picture shows the number of stores per 100000 people, and the highest region does not have more than 100000 stores per 16.3 people, which means 6000 people, so even this is FAR from the DNP return of 2500 people, so there is room for expansion here too.
Of course, this does not tell us much about the exchange rate, revenue and other increases, but the company has eaten about half/third of its bread, so growth should slow down, which is currently priced into the exchange rate, as we will see later. However, if I assume that Biedronka's revenue is PLN 101 billion with 3730 stores, then revenue should be double that to PLN 200 billion. This assumes a revenue growth of about seven times that of Dino Polska (WSE:DNP), which is PLN 29.7 billion with 2750 stores, before they catch up with this revenue volume.
Intelligent Investors – which is a great Hungarian service – also had a store number calculation, where the maximum could be. They started from the fact that the most covered voivodeship is Krotoszyn, where a Dino Polska (WSE:DNP) store has been operating for 20 years, and the coverage here is 45-46%. Calculating the market size for the whole of Poland, the remaining area is roughly 20 billion USD (by 2023), which is 80 billion PLN and 11500 stores. If DNP acquires half of this, it means 44 billion PLN and roughly 6000 stores. This is not that much, but it also does not take into account the part taken from the competition, for example, Tesco has exited the market, so there are losers. One analyst, citing a study, estimated the Polish FMCG market at 202 billion PLN, or roughly 50 billion USD, which can also be used as a corner figure.
What is the lesson from the above? There is still a lot of room for Dino Polska (WSE:DNP) to grow, I think this can be measured in at least 10 years, but the company has already started diversifying, as you will see below.
Dino Polska SA's foreign expansion: how much more can it do?
The question is how realistic is foreign expansion with a strategy that focuses on suburban/rural people. Of the surrounding countries, Germany is eliminated due to its high urban concentration, leaving the Czech Republic (15 million inhabitants), Slovakia (4 million inhabitants) and Lithuania (3 million inhabitants), which together account for about half of the Polish market. The former two are less fragmented, the latter much more so. Which I think could bring brutal growth if the war were to end and the company could expand into Ukraine (35 million market) and Belarus (9 million inhabitants), but since the political situation is currently unpredictable in these areas, I would not count on this. There is a calculation for the first 3 countries on the Atmos Invest channel (Substack Atmos Invest), which assumes a further maximum expansion of 22%. That is, the number of stores is somewhere between 6-10000, not counting the Ukrainian and Belarusian markets.
💡Of course, starting with the annual expansion of around 350, this will certainly last for another 8-15 years, which is a sufficiently long period of time for me, but the growth is nowhere near infinite.💡
Another specialty is that InPost (INPST.AS) also installs its parcel points next to Dino Polska stores, which is roughly the same as the AlzaBox parcel points owned by Alza.
💰How does Dino Polska SA (WSE:DNP) make money and what market advantages does it have?💰
In this section, we examine what exactly the company does, how it generates its revenue, what products and services it has, how indispensable they are. Does it have any competitive advantage (economic moat), how defensible it is, and whether the trend is decreasing or increasing, and what is likely to happen in the long term.
In the two sections above, I have practically said everything about the company's money-making ability, so I will talk a little about the market advantages. Since it produces for a single market, the Polish one, I would not use the word diversification in this case. It is a typical national company, but with a very strong embeddedness there.
Revenue distribution:
- 40.3% fresh products
- 11.4% non-food products (e.g. chemical products)
- 48.3% other food products
- 14% meat products
I think that in retail, players basically have no moats, but moats can be dug if the business model is supported by management with other market characteristics. I think this is exactly what happened in the case of Dino Polska SA (WSE:DNP), because:
- On the one hand, it is a REIT-type company (owns the land under its own stores), like Copart (CPRT) or McDonalds (MCD)
- on the other hand, it has a cost advantage due to owning its own meat processing plant, construction company, supply chain and distribution center (vertically integrated)
🏰Economic moat🏰
In this segment, I examined whether the company has any economic competitive advantage, which Warren Buffett referred to as the “economic moat,” which prevents competitors from besieging the company’s fortress, i.e. its business, and taking over its market. In the case of Dino Polska SA (WSE:DNP), these could be the following:
- 🫸Cost/scale advantage: clearly yes and constantly increasing.
- 🫸Switching cost: partially yes. People won't go to a more expensive supermarket that's further away, but transit traffic will stop at places like Dino Polska SA (WSE:DNP) stores.
- 🫸Network effect: no.
- 🫸Intangible assets, know-how, trademark: partially yes. People associate the brand name with cheapness and convenience. Plus, the know-how of vertically integrated companies is something that competitors don't have.
- 🫸Barriers to entry: very low. Anyone can run a corner store, but only with a very low number of stores. The moment someone wants to maintain a store network, there are already serious logistical challenges and there is STILL no economies of scale, so it is clearly there on a large scale. The other is that a given area can only accommodate a certain number of stores. Dino Polska typically opens its stores in small towns of about 5000 people, where 2500 Dino Polska SA (WSE:DNP) store is profitable for about 1 people, so there is nowhere to enter with another one, so the entry barrier will be the lack of space itself. For this reason, competitors, even if they enter a given area, would have to operate at a loss continuously.
Overall, I think Dino Polska is a developing company with a thin moat, which is still growing rapidly, but if it reaches a certain size, it could become a wide moat, but it is also able to outgrow its own market, due to its finite nature. I would not say that the business is irreproducible, with enough capital anything can be done, there is no great technological advantage or resource shortage here, just as a highly skilled workforce is not a barrier to someone copying the business model. However, in the Polish market, due to national identity and vertical integration, the success of Dino Polska looks ALMOST UNREPRODUCABLE, unless another Polish entrepreneur tries to capture the market. What is certain is that a player of the same size can no longer fit in the market.
There was a good discussion in an article I read about Dino Polska SA (WSE:DNP) about what it would take to break the current hegemony of stores in the Polish market. The holy trinity was as follows:
- lower prices than before
- wider range
- Make home delivery convenient and excellent
There is only one company in the world that knows this. It's called: Amazon
🎢Dino Polska SA (WSE:DNP) metrics🎢
In this section, I examined what metrics characterize the company, how it stands on the revenue side, what margins it operates with, whether it has debt, what the balance sheet shows. I look for items that are challenging - too high debt, high goodwill, etc. - what return on capital the company is working with, what its cost of capital is, how the revenue and cost sides are structured. I also examine trends, owner value creation, and what the company uses the cash it generates.
Dino Polska SA (WSE:DNP) is also a business based on economies of scale, so it basically works with low margins. This is usually true not only for margins, but also for other metrics, since retail is an intermediary business, selling to consumers what others produce. And the intermediary margin cannot be too high, just as it is difficult to flash a big one on the value creation side. In practice, this means that the net profit is usually between 3-5%, which is why the company has to sell in an incredibly high volume in order to generate a lot of revenue and ultimately profit.
Dino Polska SA (WSE:DNP) nevertheless stands out from its own market segment, especially on the value creation side, but its growth has also been outstanding so far. It is worth looking at the revenue and profit trends, you can practically see an upward curve if you connect the tops of the columns. What I think is very rude is that in 5 years, revenue increased by 161%, operating profit by 105% and net profit by 111%. The last year contradicts the trend, but since 2023 and 2024 pulled down consumption with high inflation, this is completely understandable.
The following list shows how much revenue is increasing:
- 2019: PLN 7647 billion (+31%)
- 2020: PLN 10126 billion (+32.4%)
- 2021: PLN 13362 billion (+32%)
- 2022: PLN 19802 billion (+48.2%)
- 2023: PLN 25666 billion (+29.6%)
- 2024: PLN 29274 billion (+14.1%)
If you take away just one thought from this, it should be this: as long as this high growth continues, no matter how expensive the company is, it will simply catch up with its own pricing with its growth. Although there is some slowdown, this is probably due to the current bad economic situation. However, Dino Polska SA (WSE:DNP) is not affected by the current tariff war, as it produces and sells most of its products locally.
Margins are also increasing, the most telling change is the FCF margin, which went from -2% to +3%. This is practically only influenced by how many new stores are opened, i.e. what the company's sunk cost is.
🧮What do ROIC and ROCE metrics show?🧮
ROIC – Return on Invested Capital – shows how efficiently the company uses its total invested capital to generate profit. Read more here.
- It shows the company's fundamental value creation capability.
- It filters out the impact of the financing structure.
- If ROIC exceeds the cost of capital (WACC), the company is creating value.
ROCE – Return on Capital Employed – shows how efficiently the company uses its long-term financing sources. Read more here.
- It measures the profitability of business activities.
- It does not take into account tax effects.
- A good basis for comparison between different industry players.
| Indicator | What does it measure? | Who is it useful for? | When is it considered good? |
|---|---|---|---|
| ROCE | Total return on capital | Long-term investors | If higher than the industry average |
| ROIC | Return on invested capital | Equity investors | If higher than WACC |
| ROE | Return on equity | Shareholders | If stable and sustainably high |
The ROCE/ROIC values are brutal, meaning the return on invested and working capital is huge. These are constantly rising numbers, as efficiency improves, as size increases, costs decrease proportionally. I always look at the WACC, or weighted average cost of capital, for ROIC, which is 11.6%, if the ROIC is higher than this, then the company is creating value. This is not a company with a small capital requirement, like the software companies analyzed earlier, such as Computer Modeling Group (TSX:CMG) Or the Adobe Inc. (ADBE), so you don't have to expect similar numbers on the revenue and margin side.
💡As I have repeatedly emphasized, the internal value creation of companies is what is important, and this is also outstanding in the case of Dino Polska SA (WSE:DNP), although this is particularly difficult to achieve in this industry and is usually a strong indication of the company's excellent quality.
Ownership value creation of Dino Polska SA (WSE:DNP)
On the owner value side, I usually look at how the company uses the free cash generated. Basically, a company can do the following with cash:
- reinvests it back into the business (this is what happens 100% of the time at DNP)
- reduced debt (he doesn't have much)
- pays dividends (DNP does not pay dividends)
- buys back shares (DNP does not buy back shares)
- acquires other companies (DNP only grows organically)
Value creation in the case of Dino Polska SA (WSE:DNP) comes almost exclusively from growth, so it is a typical quality-growth business. It does not pay dividends, does not buy back shares, so these effects do not complicate value creation. The company's debt is PLN 568 million, while its cash position is PLN 574 million, so they are in a net cash position. If we compare the net debt to the PLN 29 billion revenue, it is still ridiculously low, but even compared to the PLN 1405 million net profit. In other words, the company could pay off its debt with less than 1 year of profit.
If we look at its price chart, we see that unfortunately the market also prices high value creation and rapid growth. Annual price growth of a brutal 37%, which is astonishing. However, because of this, it is never really cheap, it is almost always trading at a high valuation, but the high growth quickly catches up with the price.
Finally, one more fact that ensures the strength of the business is the development of cost levels. Since this is a physical store network, the biggest costs come from two things: the SG&A segment - this is wages and general administration, since they have about 35000 employees - and the other is the sunk cost that comes from construction. As economies of scale increase, you should see decreasing numbers, that is, improving efficiency. Let's say the market starts to narrow and there are fewer costs on the construction side because they can no longer open as many new Dino Polska stores as the company can finance from its free cash flow. In other words, a lower number of stores results in decreasing growth, but necessarily increasing cash.
Let me explain a little bit about this: if growth slows down, the share price will fall, and the free cash generated will increase, which is a direct path to share buybacks, since a given amount of cash will result in a higher owner value with a falling exchange rate. So the company will have an interest in buying itself back from the market if it cannot grow. The extra cash and acquisitions will increase the earnings per share – EPS – which will raise the share price, since fewer shares have the same amount of cash-generating capacity. In addition, if new functions are added to an existing store network, such as a pharmacy, cosmetics, and so on, the land does not need to be repurchased, so this no longer appears on the capital cost side. A good example of this is the logic of gas stations: they sell fuel, but the majority of the profit is generated on coffee and other products.
I think it was great management communication that they said in advance that Like-for-like sales and the pace of store openings would decrease, simply because the high interest rate environment, which meant inflation of over 2023% at the beginning of 14, made loans much more expensive. This is also visible in my increasing free cash flow, so this was NOT due to MARKET CONTRACTION, but was a conscious, pre-communicated decision by management. I like honest leaders like that.
💵Acquisitions of Dino Polska SA (WSE:DNP)💵
In this section, I examine how acquisitive the nature of the company is and what impact each acquisition had on the life of the company, if any.
They practically do not have any, they have not acquired any competing retail companies, the company has grown exclusively organically so far. The question is, what happens if the number of stores cannot continue to grow? I think it is unlikely that they will acquire other chains, since this is not their format, they cannot buy all the land or build a supply chain behind the competition. What occurred to me, however, is that their basic service can be supplemented at any time with other well-producing businesses, e.g. a pharmacy, and there are also visible efforts to do so.
The founding CEO, Tomasz Biernacki, recently bought a pharmaceutical company. He acquired 75% ownership in eZebra for 14 million USD, which focuses on cosmetics and pharmaceuticals. Isn't the goal to introduce a new product line? The company would already have the necessary scale, as there are already nearly 2750 Dino Polska stores.
It has also been suggested that Dino Polska will build gas stations next to its stores, at least according to an article (Business Insider article), which claims that they have filed a trademark application for the name Dino Oil with the Polish Trademark Office (Dino Oil trademark), this would mean competing with, among other things, the Polish Orlen gas station network.
🤵The management of Dino Polska SA (WSE:DNP)🤵
In this section, I examine who runs the company and how. What is the bonus system, how much risk – skin in the game – do the managers take on while running the company? Is there a family connection, or perhaps a special “heritage” factor?
The company was founded in 1998 by Tomasz Biernacki, who opened his first supply center in Krotoszyn in 2002 to support stores. In 2003, Agro-Rydzyna started supplying stores with meat products. In 2010, due to faster growth, it attracted venture capitalists led by the Enterprise Investors fund, who asked for 49% of the company's shares in exchange for EUR 49.4 million. In 2017, when Dino Polska owned 775 stores, the investors exited the company through an IPO, essentially selling their shares on the stock exchange for EUR 376 million (an eightfold increase in 7 years, with a CAGR of 34% per year).
From that moment on, the founder has neither issued nor repurchased a single share from the market – DNP has no share buyback program – and has practically not given a public interview since the 2008 Ferrari accident. He lives a secluded life, but probably has a say in the management of the company from behind the scenes. He does not take a salary, does not receive any incentives, and simply maintains the ownership stake required for an absolute majority of 51%.
- 1998 – Tomasz Biernacki – Chairman, 51% owner, has never sold a single share of his stake, does not take a salary
- 2004 - CIO Piotr Ścigała, Head of the inspection department, He was a store manager in 2003, and has been a member of the corporate management team since 2004. He has been with the company for 19 years, coming from within, the company highlighted.
- 2011 - COO Izabela Biadała, has been with the company since 2002, has held logistics and administrative positions, has been a member of the management team since 2011, has been with the company for 20 years, came from within, the company highlighted.
- 2016 - CFO Michał Krauze, has been with the company since 2002, has held payroll and finance positions, has been a member of the management team since 2014, has been with the company for 20 years, came from within, the company highlighted.
- 2019 - Simon Piduch former CEO, resigned due to health reasons, has not been replaced since, probably because Tomasz Bienarcki could also fill this role.
💰Management bonus for Dino Polska SA (TSE:DNP)💰
The above shows that key positions are filled by leaders who are very loyal to the company and who have been selected and trained from within. As for the compensation structure, Dino Polska (WSE:DNP) rewards performance rather than a high base salary. This is why management is VERY interested in seeing DNP soar. Much like what I wrote in my analysis of Computer Modelling Group (TSE:CMG) (CMG analysis). This means the following:
- fixed fee: which cannot be more than 10x the salary of an average DNP employee, unlike at a bank or an oil company where this can mean a hundredfold multiplier.
- variable fee: quarterly bonus based on company performance, if approved by the board of directors, this is called a PSU, or Performance Share Unit.
The proportions look like this:
- CFO: Krauze's fixed/variable fee: PLN 119700+PLN 1.31 million in 2022. It can be seen that the base salary is not even 10% of the total salary, if the company does not perform well, the manager does not receive any money. This is about USD 350000, while top bank managers earn USD 5-50 million per year.
- COO: Biadala's fixed/variable fee: PLN 120000+PLN 699000 in 2022, total PLN 820000, which is USD 210000.
To summarize the above, the majority of management compensation is variable compensation, which is tied to the company's performance, so the bonuses are very similar to what you can experience at other companies (CMG, CSU, etc.). This means that managers are very interested in the company's progress and are not overpaid.
🆚Competitors: Dino Polska SA (WSE:DNP)'s opponents🆚
In this section, I examine who the competitors of the analyzed companies are, what is their market position, whether they are in a subordinate, secondary or superior role. What is their market share and what is their specialty? Are they losing or gaining market share to their competitors?
Dino Polska SA (TSE:DNP)'s competitors are retail companies in the Polish market. They were mentioned briefly when I discussed the market size, but the table below sheds much more light on which company is where. There are relatively many competitors, but since the market is quite fragmented, you can move up the rankings quickly. It is interesting that several articles mention different competitors with different data. I have collected the most important metrics based on Finchat.
- Biedronka (Jeronimo Martins SGPS, SA): The largest domestic supermarket chain is Biedronka, owned by a Portuguese listed conglomerate. It is the market leader, with 28% of the total market with 3400 stores. They use a supermarket format – not a direct competitor of DNP – and according to 2024 data, they had more than PLN 100 billion in revenue from Biedronka, which is about 3.5x that of DNP. Despite this, their margins and other indicators, e.g. return on equity, are lower than those of Dino Polska SA (WSE:DNP).
- Lidl: In 2022, they had 900 stores, revenue of PLN 27 billion, store size and format are very similar to DNP, but slightly larger. They could be direct competitors to DNP, but they do not use proximity stores, they do not compete. Private company, not listed.
- Eurocash: With PLN 32 billion in revenue, they are in 2nd place, 3rd is Dino Polska with PLN 29.3 billion, but one more year of growth and the dice will turn. They operate in a franchise system, under different brands such as Cash&Carry, Delikatesy Centrum, PSH Lewiatan.
- Zabka Group: Zöld Böka's sales revenue was PLN 27.3 billion in 2024, but it is a different format, smaller than Dino Polska, more of a convenience store-like franchise business, but it is Dino's main competitor. They have 10500! stores, so they may have economies of scale compared to DNP. In Q2024 3, their LFL revenue grew by 6%, while in the last 9 months it grew by 8.6%.
- In the fragmented market, Carrefour Express and Polo Market also compete with Dino, but they are much smaller.
Based on the above, it is expected that within 1-2 years, Dino Polska's (WSE:DNP) revenue will exceed PLN 30 billion and become the second largest retail chain in Poland. Biedronka is far behind, while Lidl and Eurocash are constantly being squeezed out of the market, and it is currently not clear how this trend will reverse.
The most dangerous opponent is Zabka Group (Żabka Polska), which has similar-sized stores on the Polish market and is also growing in sales. In the last 9 months, their LFL revenue increased by 8.6%. They can grow faster due to their franchise nature, but the rent drags down profitability in the long term. Dino is growing slower in proportion, but its internal rate of return is more stable and higher.
Even though Biedronka has “only” 3600 stores, they are significantly larger stores, which is why they generate much higher revenue. What will be worth watching is how the market percentages will change, i.e. which company will take the other's market, and whether they can grow together with the market. In 2024, their revenue increased by 9.6%.
⚡What are the risks of Dino Polska SA (WSE:DNP)?⚡
In this section, I examine all the risks that could affect the company's long-term future. Currency, regulatory, market disruption, and so on.
I've read several things about risks, and there's quite a bit I agree with:
- regulatory risk: The state likes to intervene in the market by regulating prices. I don't see this as a big risk because the government usually plays with the general sales tax, and the costs can continue to be passed on to consumers through other products, as has been the case so far. This means that the loss suffered on a price-stopped product is compensated by the supermarket chains by raising the price of another product.
- currency risk: the PLN/EUR exchange rate difference may erode the numbers.
- growth slowdown: I see this as the biggest danger, as the market size is limited and the standard of living in Polish voivodeships is not the same, it decreases towards the east. This assumes that the stores opened here will have a lower revenue generating capacity.
- Conquering foreign markets: It's not certain that this model works there, there is no national consciousness, the market is not as fragmented.
- Copy strategy: Biedronka has started to copy Dino Polska's tactics, e.g. from the meat counter side, and Zabka Polska is also trying to take on DNP with a franchise model.
- sole proprietor: What happens if Tomas Bienarcki suddenly dies or just sells his stake or takes the company off the stock exchange?
- spread of war: I see it as a small risk because Poland is a NATO member, but it's not zero. The Ukrainian-Russian conflict could easily escalate.
Currency risk is relatively easy to check, I looked for a chart and saw how much the EUR has strengthened over 10 years compared to the Polish zloty. 6.71%, which is almost nothing, the same against the dollar is 1.05% over a 10-year period.
I made a kind of self-check list that confirms my thesis about the company:
- low or zero debt: YES/PARTLY/NO
- significant economic benefit that can be protected in the long term: YES/PART/NOT
- excellent management: YES/PARTLY/NO
- excellent indicators, significant owner value creation: YES/PARTLY/NO
- The majority of the total return comes from reinvesting the cash generated, not from dividends: YES/PARTLY/NO
- appropriate company valuation: YES/PART/NOT
It's been a long time since I've given a company this much positive feedback. The problem is primarily the valuation and the finite size of the market, but these are fairly well-defined problems.
I read a very good description of this type of competitive advantage, which Dino Polska (WSE:DNP) also has. The phrase comes from Charlie Munger: "Lollapalooza moat"The point of this is that a company on its own does not have a big competitive advantage in anything, but the power of many smaller factors adds up, in this case:
- owning shops and land instead of renting
- standardization and cost-effectiveness: form shops, no advertising
- vertically integrated company structure: own construction company, own meat processing and logistics
- crowding out effect against competitors, the catchment area cannot support another competitor
- strong value proposition to the customer: playing on domestic, nationalistic sentiment, low pricing, so the competition cannot undercut it
Many little things that both increase Dino Polska SA's (WSE:DNP) competitive advantage and create the Lollapalooza moat that competitors will have a hard time jumping over.
👛Dino Polska SA (WSE:DNP) valuation👛
In this section, I will examine the company's current valuation compared to historical values and consensus fair values.
Rating metrics
In the two rows below you can see valuation metrics. The first row shows the current valuation, the second row shows the historical valuation. Although I don't think these metrics are particularly good, because they hide a lot of things, they can be used as a benchmark. It is important to note that since most of you will probably want to buy the stock not in zlotys, but in dollars, the winner will be the stock listed in USD, registered as an American ADR, available under the DNOPY stock identifier. That is why I calculated the numbers below in dollars.
- Share price (2025-04-01) 62.5 USD; P/E: 32.71; EV/EBITDA: 20.24; P/FCF: 84.44 (Based on Finchat.io)
- Historical median valuation (10-year average): P/E: 35.92; EV/EBITDA: 21.91; P/FCF: 92.88 (Based on Gurufocus)
Why don't you see a DCF model in this segment? Because each input data produces a huge variance in the output, and most of the data is an estimated value. Therefore, the valuation will never actually be a single exact number, but rather a range can be defined where the current valuation falls.
You should apply a margin of safety to this price range, according to your risk appetite.
So don't expect an exact price, no one can say this for a stock. However, there are fair value prediction services, almost every major stock search site has one, I've aggregated them below. However, if you want a good stock support service, subscribe to The Falcon Method (The Falcon Method), entry prices are given for the stocks analyzed there.
I don't think the FCF value is useful in this case, as the FCF was negative in most years due to the cost of building the stores. So, its extremely high value shouldn't bother anyone in this case.
Rating
- Peter Lynch Median P/E: $63.81
- Morningstar: X USD (4 stars)
- Gurufocus: $80.3
- AlphaSpread: $46.54 (26% overvalued compared to base case)
- SimplyWallst: $117.3
- Wall street estimates: 33.52-68.35=51 USD (Based on these, I took into account the average of the two extreme values, Alphaspread)
Average price (based on 6 ratings): 71.79 USD (12% undervalued compared to average, at current share price of USD 62.5)
How to interpret the numbers? The above "margin of safety" rule should be applied according to your convictions, so if you really believe in the company, you can buy it at a fair value, but if you proceed in 10% increments (whose convictions are strong), the math would look like this:
- 10% margin of safety: *0.9= USD
- 20% margin of safety: *0.8= USD
- 30% margin of safety: *0.7= USD (we are somewhere below this now)
- 40% margin of safety: *0.6= USD
- 50% margin of safety: *0.5= USD
Of course, the list could go on and on, but the point is that the right purchase price for you will be determined by the level of your conviction.
As for DNOPY's valuation, first of all, there is a huge spread in the estimated value, the prices range between 46.54-117.3 USD, which is almost incomprehensible. In this case, you have to consider the following: in the last, high-inflation, bloody year, Dino Polska's revenue increased by 14%, and before that, by about 30% for years, the company is so good quality. In other words, it is INSANE in its own high valuation, and if you look back at today's pricing in 5 years, the stock will seem ridiculously cheap even if you buy it at fair value, which is why I cut the share price, which is rising by +37.1% CAGR, higher.
🌗Significant news and the last quarter🌗
In this section, I will examine what happened in the last quarter, whether there were any significant news/events. If the company reports semi-annually, we examined this period.
Dino Polska's last quarter is Q2025 1 (for some reason this is how they end the year), which was announced in May 2025. It is important that Dino Polska does not have a quarterly event in the traditional sense, so you cannot ask questions to the management, and they do not give forward-looking tips regarding their own income, but there is a colorful presentation for each quarter. I agree with this to some extent, because the hysteria around American companies with their forecasts is exaggerated, and what happens in 1-2 quarters, the years of value creation, is basically of no importance.
Since this is the first quarter of the year for Dino Polska SA (WSE:DNP), let's look at how the numbers have changed compared to Q2024 1. Not all data is the same in the annual and quarterly reports, because it makes no sense to publish the number of distribution centers quarterly, for example:
- 🎯Quarterly revenue: PLN 7354 million (+10,2% compared to Q2024 1, when it was PLN 6671 million)
- 🎯EBITDA and EBITDA margin: +8.2% (7.4% in Q2024 1), -0.1 pp (0.9% narrowing in margins in Q2024 1)
- 🎯Number of stores: +58 units (+32 in Q2024 1, bringing the number to 2746 units)
- 🎯These are the stores that have solar panels: 2569 (+91 units in Q2025 1)
- 🎯Energy generation capacity of solar panels: 103 MW (+17% year-on-year)
- 🎯LFL growth: 0.5% (was 11.9% in Q2024 1)
In fact, this is a nothing special half-year, the usual growth rate, 10,2% per quarter is not a bad number at all. Like-for-like sales are stagnant, pretty much everything else is growing roughly as before. A surprisingly large number of stores opened compared to last quarter, I couldn't find any other noteworthy data. It's worth looking at the pictures in the report, they're quite telling (2025Q1 results).
Next quarterly report (2025 Q1): 2025.08.20
Below you can see the previous Q2024 4, i.e. the quarter ending the year, which I also left in the analysis. It is also good to see what happened in a full year in a yearly breakdown, i.e. the numbers below should be understood compared to 2023 (YoY):
- 🎯Income: PLN 29274 million (+14.1% potential for 2023, when it was PLN 25666 million)
- 🎯Quarterly revenue: PLN 7752 million (15.7% compared to Q2023 4)
- 🎯EBITDA and EBITDA margin: PLN 641.3 million and 8% (+4%, and -14% contraction)
- 🎯Debt to EBITDA ratio: 0.1x (last year it was 0.4x, while in 2022 it was 0.8x, meaning debt was repaid)
- 🎯Number of stores: 2688 pieces (+282 pieces, until the end of 2024, since then it has been around 2750. At the end of 2023 there were 2406 pieces)
- 🎯Sales area growth: +12% (1.06 million square meters, in 2024 it was 968000)
- 🎯Logistics centers: 10 and 3 under construction (in 2019 there were 4 in total)
- 🎯These are the stores that have solar panels: 2476 (+338 in 2024, this is also a cost-cutting factor)
- 🎯Energy generation capacity of solar panels: 87 GWh (was 66 GWh in 2023)
- 🎯LFL growth: 5.3% (Polish food inflation was 3.3%, so Dino outperformed by 2%)
📌Overall, I think that while the average growth rate of S&P 500 companies is around 6%, no one should be disappointed with Dino Polska's (WSE:DNP) 14.1% growth.
✨Other interesting facts about Dino Polska SA (WSE:DNP)✨
Everything that was left out of the previous ones, or if there is any special KPI - key performance indicator - or concept that needs to be explained, it is also included here.
Chris W. Mayer shares: I mentioned earlier about Computer Modelling Group (TSE:CMG) that there is a fund manager with a very concentrated portfolio, Chris W. Mayer, who buys companies with extremely strong economic competitive advantages. He wrote a legendary book (100 Baggers: Stocks That Return 100-to-1 and How To Find Them), which is worth reading. The point is that Dino Polska has been in his portfolio for years under the DNOPY ticker, which is usually a strong indicator that it is a quality company.
🔑Key Performance Indicators (KPIs)🔑
LFL (like-for-like): a special term for a group of similar, interchangeable products. The 9-year average of LFL sales is 12.6%, and the 5-year average is 15.3% for Dino Polska, which shows an upward trend. However, this stagnated in 2023, falling to 5.3%, and there is no data for 2024. The same is true for Biedronka -0.3%, while for Zabka +10.6%. The picture below shows the LFL numbers AND inflation. In the vast majority of cases, Dino Polska outperformed inflation (except for Q2024 and Q2 3), which shows that it creates value even with high inflation.
Increase in number of stores: If this number falls, it could be an indicator of a shrinking market (or more expensive credit), meaning the number of newly opened stores is slowing down.
Summary of Dino Polska SA (WSE:DNP)
Summary of the analysis, drawing lessons.
There are two big questions regarding Dino Polska (WSE:DNP): How far can the number of stores increase and how big is the market? It is worth calculating as if the company only had the Polish market. I would not be happy to buy it when the market has already priced in the very uncertain expansion abroad. I think this is not an easy operation, because the Poles are quite nationalistic, so it is not certain that their model would work the same abroad.
In other words, the key question is how long it can grow from the current number of approx. 2750 stores, even according to the most conservative calculations, to at least 5000. If I calculate with the maximum opening of 1 store per day, then this is 5-6 years, which is a long enough time frame to make it worth buying the stock. I suspect that in a few years there will be a moment when the stock valuation starts to fall and the FCF will increase. From there, the company has two options: share buybacks, or investing the FCF in other industries (e.g. opening pharmacies, gas stations, with related services).
It's also important to note that Dino Polska (WSE:DNP) is never really cheap, but its rapid growth can offset the high price if you have a long enough time horizon. It was trading around $2024 at the beginning of 40 under the $DNOPY ticker, and is now around $68, a 50% increase in price in just one year. Do you know how much it fell in the 2 months when the S&P 500 was up more than 20%? Not a bit, the stock was up or sideways. There are few better indicators that no one wants to sell a quality company.
Frequently Asked Questions (FAQ)
Which broker should I choose to buy shares?
There are several aspects to consider when choosing a broker - we will write a complete article about this - but I would like to highlight a few that are worth considering:
- size, reliability: The bigger a broker, the safer it is. Those with a banking background – Erste, K&H, Charles Schwab, etc. – are even better, and well-known brokers are typically more reliable.
- expenditures: Brokers operate with various costs, such as the account management fee, the portfolio fee - which is the worst cost -, the purchase/sale fee and the currency exchange cost (if USD is not deposited in the brokerage account)
- Availability of instruments: It doesn't matter which broker has which market available, or whether they add the given instrument upon request and how quickly.
- account type: cash or margin account, the latter can only be used for options. For Hungarian tax residents, having a TBSZ account is important, but citizens of other countries also have special options – such as the American 401K retirement savings account – which are either supported by the broker or not.
- surface: is one of the most underrated aspects, and it can be a real pain. Anyone who had an account with Random Capital, a now-defunct Hungarian broker, knows what it's like to work on a platform left over from the 90s. Erste's system is lousy slow, Interactive Brokers requires a flight test, and LightYear believes in simple but modern solutions.
Based on the above, I recommend the Interactive Brokers account because:
- the world's largest broker with a strong background
- a few million instruments are available on it, and shares listed on multiple markets – e.g. both the original and the ADR – of a single share are often available
- az Interactive Brokers a discount broker, they have the lowest prices on the market
- you can link your Wise account to them, from which you can quickly transfer money
- Morningstar's analyses are available for free under the fundamental explorer (good for analysis)
- EVA framework data is available under fundamental explorer (useful for analysis)
- they have both cash and margin accounts, Hungarian citizens can open a TBSZ
- you can use three types of interfaces: there is a web and PC client and a phone application
What data sources did you use to analyze stocks?
For quantitative analysis, we primarily use various stock screening sites, and for qualitative analysis, we use company reports and other analyses, such as the Substack channel, podcasts - Business Breakdowns - and similar sources.
What matters: value or quality?
The answer is both, but quality is more important. It is much better to buy a very high-quality company at a fair price than to buy shares of a cheap but poor-quality company.
What is the best time frame to buy shares?
The minimum is 5 years, but you should consider the time horizon from 10 years to infinity. Our approach is typical "buy and hold", the emphasis is on selection, then we try to hold the shares for as long as possible, which requires conviction. We rarely sell, mainly if we feel that the thesis we set up has been broken or if we have made a mistake.
Which is better: individual stocks or ETFs?
There is no truth to this question. It is very easy to track the market with an S&P 500 ETF, and it is worth doing for beginners, because it can be done with a little knowledge and practice. Analyzing individual stocks requires 30-50 hours per company, so we do not recommend it to those who do not like it.
Do you hold the shares in a TBSZ account?
Yes. As a Hungarian citizen, the tax advantage over a traditional cash-based account is so great that it is worth opening a new TBSZ account every year, and then the withdrawal of money is also solved (but if you do not want to withdraw anything from it, you can extend these)
Why don't you specify a specific purchase price for the shares in your analyses?
We do not set purchase prices for several reasons: firstly, because it is impossible to calculate the exact value of a company. Secondly, because we cannot give investment advice, these analyses are only made to support the decisions of others. That is why we use fair value estimates from other services, as well as a certain margin of safety. Ultimately, your conviction will decide how much a company is worth to you.
Which stock price will rise or fall?
Nobody knows, because there is no magic bullet that can tell. It can be based on mathematical probabilities. The prices of high-quality companies that have growing sales, are able to reinvest the cash generated into the business, and have high intrinsic value creation tend to rise in the long term. But in the short term – a few years – the market and the price can move anywhere.
Legal and liability statement (aka. disclaimer): My articles contain personal opinions and are written solely for my own entertainment and that of my readers. iO ChartsThe articles appearing on this website do NOT in any way exhaust the scope of investment advice. I have never intended, do not intend, and am unlikely to provide such advice in the future. The information provided here is for informational purposes only and should NOT be construed as an offer. The expression of opinion is NOT a guarantee to buy or sell financial instruments. You are SOLELY responsible for the decisions you make, and no one else, including me, assumes the risk.
