November 2, 2016

Valens Equities Weekly Insights and Inflections for November 2, 2016


Each week the Valens Securities team highlights our most interesting insights from across our tools and our analysis, including individual company industry and macro insights

Even after recent news sent WGO shares nearly 25% higher, continued tailwinds and growth in analyst confidence indicate the market is still not recognizing the firm’s potential

veii-2016-11-02

Even after the stock price jump resulting from the firm’s acquisition of Grand Design RV, WGO is still trading near historically average valuations, at a 12.6x V/E’. At these levels, the market is pricing in expectations for declining ROA’, from 9% in 2015 to 7% in 2020, accompanied by 9% Asset’ growth. However, analysts have bullish expectations relative to the market, projecting ROA’ to increase to 12% in 2017, accompanied by 18% Asset’ growth. Additionally, Valens’ qualitative analysis of the firm’s Q4 2016 earnings call highlights that management is confident about fundamental tailwinds, and Incentives Dictate Behavior analysis highlights that management will likely continue to focus on ROA’ expansion going forward. Given growing management confidence in the firm, and management’s alignment with shareholders for long-term value creation, market expectations are too bearish, and further equity upside is likely warranted.

Market Insights
Most Compelling Long Ideas
FB, ZG, TWTR, NOV, MYL

Most Compelling ECF™ Inflections
CRUS, ABC, AYI, WCN, MA

Company Specific Highlights & Insights:
A, ACM, BERY, BLBD, CCI, CEQP, DAL, ENLK, GE, INCY, IRMD, MON, MU, NS, PAGP, RSPP, STZ, TJX, YUM

Aggregate ECF™ Trend Analysis:

Management confidence levels continue to be volatile, ranging between 24 month highs and 24 month lows in the past 6 months. In April, Management Confidence spiked higher, but the metric subsequently rolled over in recent months, falling to the low end of its range. This signaling that growth remains elusive, as management teams continue to not be confident enough to invest in their businesses.


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