What does the market not like?
I'm looking to add a new industrial and BYD and SLP are being considered. Where does your money go?
SLP's share price has been largely stagnant over the past few years, while its sales have grown, debt levels remain low, free cash flow has grown or remained flat, and its balance sheet has expanded. Although, its profit margins have slipped from mid- to high-20s over the past several years to 17% over the past 12 months, and its valuation remains elevated at 56X forward earnings. While its fundamentals have grown, its price remaining flat has caused its valuation to contract, albeit still within a relatively high range. Its fundamentals look decent, but it does not generate that much cash flow, is somewhat small ($780M market cap), and trades at a high valuation. Given its high valuation, we would prefer to wait until it improves on earnings beats to add to this name.
We would prefer BYD here today.
Authors of this answer, directors, partners and/or officers of 5i Research and/or affiliated companies have a financial or other interest in SLP.