September 28, 2016

Valens Equities Weekly Insights and Inflections for September 28, 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 SPR to see ROA’ declines are too bearish, as management is growing more confident about trends in both markets and their operations

spr-stock-chart

SPR is trading at a 12.7x V/E’, which is near historical lows. At these levels, the market is pricing in expectations for a declining ROA’, from 17% in 2015 to 9% in 2020, accompanied by 2% Asset’ growth. However, analysts have less bearish expectations than the market, projecting ROA’ to decline to 12% levels in 2016 and 2017, accompanied by 3% Asset’ growth. Moreover, Valens’ qualitative analysis of the firm’s Q2 2016 earnings call highlights that management is confident about production improvements and delivery growth, as well as trends in the aviation market and their margins. Given growing management confidence surrounding the firm’s fundamentals, current market expectations are too bearish and equity upside for SPR may be warranted.

Market Insights
Most Compelling Long Ideas
FB, ZG, DLTR, DHI, GOOGL
Most Compelling ECF™ Inflections
CRUS, ABC, AYI, WCN, MA

Company Specific Highlights & Insights:
ENXTPA:AI, BLL, CSCO, CZR, DIS, SWX:DUFN, DVA, EL, ESV, GD, GE, MDT, MTOR, NBL, PKI, PX, PXD, SHLD, TSLA, TSN, UNP, WSM, ZTS

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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