Q: Has anything changed since your last report on this company about a year ago?
Will capex taper off, and can they start whittling down debt? Is the current level a concern? Will they pursue more acquisitions?
If one's maximum waiting per stock is 5%, does about 2% seem comfortable for this one?
Will capex taper off, and can they start whittling down debt? Is the current level a concern? Will they pursue more acquisitions?
If one's maximum waiting per stock is 5%, does about 2% seem comfortable for this one?
5i Research Answer:
We think 2.5% is probably about right (our Balanced Model is 2.8%). Debt is quite high at $2.7B, against $253M cash flow (in a good year like 2024) and debt is likely the main risk here. But, the company has a solid multi-year plan to improve margins and efficiency. Very strong earnings growth is expected this year and next. The stock has not done much, but is priced well at 13x earnings and we think there is potential. It needs better execution (it missed the last quarter) but we think the low valuation reflects its risks well, and we are willing to give it several quarters to prove its plan is on track.