October 5, 2016

Valens Equities Weekly Insights and Inflections for October 5, 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 HAR to see ROA’ declines are too bearish, as management is growing more confident about their market share and demand

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HAR is trading at an 11.5x V/E’, which is near historical lows. At these levels, the market is pricing in expectations for a declining ROA’, from 14% in 2016 to 10% in 2020, accompanied by 2% Asset’ growth. However, analysts have less bearish expectations than the market, projecting ROA’ to remain at 15% levels through 2017, accompanied by 4% Asset growth. Moreover, Valens’ qualitative analysis of the firm’s Q4 2016 earnings call highlights that management is confident about recent partnership agreements, demand, and their fundamental performance. Given growing management confidence surrounding the HAR’s fundamentals, current market expectations are too bearish, and equity upside 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, ALV, AR, ARMK, CLX, CSRA, CSX, EL, ETE, FIS, IR, KFY, LDOS, DB:LIN, LVS, MBLY, MYL, NAV, NTAP, NWL, RLGY, SEE, WAT,XRAY, 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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