October 12, 2016

Valens Equities Weekly Insights and Inflections for October 12, 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

Market expectations for DLPH to see ROA’ declines are too bearish, as management and analysts are growing more confident about the firm’s outlook

DLPH is trading at an 11.8x V/E’, near historical averages. At these levels, the market is pricing in expectations for a declining ROA’, from 18% in 2015 to 15% in 2020, accompanied by 2% Asset’ growth. However, analysts have bullish expectations relative to the market, projecting ROA’ to remain at current 19%-20% levels, accompanied by 5% Asset’ growth. Moreover, Valens’ qualitative analysis of the firm’s Q2 2016 earnings call highlights that management is confident about growth and earnings, and already bullish analyst estimates have grown materially over the last year. Given growing analyst and management confidence surrounding the firm’s fundamentals, current market expectations are too bearish. Equity upside for DLPH may be 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:
TSE:6501, AET, AMKR, APD, ARMK, CLX, CSC, DPLO, EIX, EMR, EPD, EQT, ES, ETE, ETP, FIS, INSY, LVS, MAR, MBLY, MMP, MWA, OKE, PRGO, RLGY, SFM, THC, TPC, TSX:TRP, VC, WAT, WMB, ZBRA,

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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