A Cash Machine Hiding in Sixty Thousand Spanish Bars. 51% Margins. 5.5x EBITDA. And an 80% EPS Move the Market Refuses to Pay For.

when I was a kid, every bar in Spain had three things: a coffee machine, a television, and a slot machine.

the coffee machine was for the morning, the television for the football, and the slot machine for the old men who came in after lunch and stayed until the owner turned the lights off. you do not notice slot machines in Spain the way you do not notice lampposts. they are bolted into the corner of every bar in every village in every autonomous community, blinking quietly while the country gets on with its life.

my grandfather had a bar, not the kind a city person imagines, with cocktails and a dress code, but a bar with a kitchen in the back, a terrace facing the square, and a slot machine by the door older than most of the customers. I never thought about who made the machine, who owned it, how much it earned, or what happened to the coins after the man with the toolbox came on Tuesdays to empty the hopper. I was a child. my concerns were the football and whether anyone was watching the ice cream.

I did not think about any of it until three months ago, when a stock screener handed me a number that did not make sense.

a company that has compounded earnings at 13% a year for twenty years. that has met or beaten its own guidance every single year of its public life. a 51% operating margin on a product people walk past without noticing. earnings near record highs, and a share price under artificial selling pressure, not because anything is wrong with the business, but because the private equity firm that took it public is running the exit playbook: selling its stake into the open market, methodically, quarter by quarter, suppressing the price while the fundamentals climb underneath. it is a playbook, not a problem. and I have seen it before, because an Italian company in the same industry, with the same kind of owner, running the same exit, looked exactly this trapped and exactly this cheap three years ago. that company’s stock went up roughly fourfold. I will get to it.

but that is not why I bought. what made me buy was something I found on page 389 of a 636-page IPO prospectus at two in the morning. the market is ignoring a number. not the revenue. not the EBITDA. the tax line. a quirk in how Spain caps interest deductibility means this company’s EPS is about to grow 80% over three years on an EBITDA that grows only 18%. the effective tax rate is falling from 60% toward 30% as the debt comes down, and the price is not pricing a single euro of it. the earnings are about to move through the one line nobody is watching. it is testable in two quarters. not a story, a date.

after that I built a downside case. no re-rating, no growth surprise, the market never once changes its mind. it still returned nearly 50% over two and a half years. because the floor rises on its own, the debt falls, the earnings flow to the equity, and the price follows whether anyone agrees with me or not.

here is everything I found.