Summary Headlines – Inside This Month

• As covered in this month’s Litman Letter, the market’s sentiment (aka “the voting machine”) continues to provide buying opportunities where fundamentals tip the scales toward more upside (aka the “weighing machine”)
• Profits and profitability continue to rise to all-time highs across US corporations (UAFRS-adjusted, accurate calculations)
• US firms likely to use profits to increase capital investments in 2019

Each week, Valens focuses on several companies that were analyzed in the prior week, where material distortions caused by as-reported GAAP accounting need to be corrected to understand a company’s economic fundamentals. Live Nation Entertainment, Inc. (LYV),Monotype Imaging Holdings, Inc. (TYPE),Ellie Mae, Inc. (ELLI)

This week the Valens Research team highlights our most interesting equity insight from across our tools and our analysis. CVS is transforming their business and the health market, and current low market expectations do not recognize the company strategy, strong management alignment, and growing management confidence that justify upside

Highlighted Top Ideas AVP – Avon Products, Inc., DISH – DISH Network Corporation, TWTR – Twitter, Inc. Other Recent OC – Owens Corning, AMKR – Amkor Technology, Inc.

Pinterest, Inc. (PINS:USA) Assuming a $16 share price, the midpoint of current price ranges, and an anticipated 529 million shares outstanding, Pinterest, Inc. (PINS:USA) will IPO with valuations well above corporate averages relative to UAFRS-based (Uniform) Earnings, with a 37.1x Uniform P/E. At these levels, the market is pricing in expectations for Uniform ROA to expand from 8% in 2018 to 29% through 2023, towards the high end of mature peer levels, accompanied by 6% Uniform Asset growth going forward

Each week, the Valens Research team highlights our most interesting insights from across our tools and our analysis, including individual company, industry, and macro insights. Top Highlight: Beazer Homes USA, Inc. Other Highlights: BYND, HCKT, LYFT Other Recent Analyses: AMKR, AMT, BBY, BIIB, CCL, DNR, FORR, LEVI, LLL, MDLZ, NCI, PAYX, PRFT, SBAC, SITE

Lowe’s Companies, Inc. (LOW:USA) currently trades above historical averages relative to UAFRS-based (Uniform) Earnings, with a 26.7x Uniform P/E. At these levels, the market has bullish expectations for the firm, but management has concerns about their ability to improve underperforming categories, manage distribution and store inventory, and successfully reduce SG&A leverage

Each week, Valens focuses on several companies that were analyzed in the prior week, where material distortions caused by as-reported GAAP accounting need to be corrected to understand a company’s economic fundamentals.
John Wiley & Sons, Inc. (JW.A), Ambarella, Inc. (AMBA), Huron Consulting Group Inc. (HURN)

Lyft, Inc. (LYFT:USA) currently trades well above corporate averages relative to UAFRS-based (Uniform) Assets, with a 21.2x Uniform P/B. At these levels, the market is pricing in expectations for Uniform ROA to materially expand, and inflect positively, improving from -117% in 2018 to 32% in 2023

Value stocks top our April Valens Conviction Long List, with Capital One Financial (COF) remaining at the top of our list. Our other picks this month are: CRUS, CVS, FSLR, GRMN, WGO, EBAY, PINC, MTZ, HIG, THRM, ASGN, DISC.A, FB, LRCX, DHI, MYL, GILD, TPR, AMN, NOV, CTXS, and BHC.

The Hackett Group, Inc. (HCKT:USA) is currently trading above corporate averages relative to UAFRS-based (Uniform) Earnings, with a 13.8x Uniform P/E. At these levels, the market is pricing in expectations for Uniform ROA to decline from 55% in 2018 to 26% in 2023, levels the firm hasn’t seen since before the 2009 recession

Navigant Consulting, Inc. (NCI:USA) currently trades below recent averages relative to UAFRS-based (Uniform) Earnings, with a 15.6x Uniform P/E. Even at these levels, the market is pricing in expectations for Uniform ROA to improve from a low of 9% in 2018 to 11% in 2023

Beazer Homes USA, Inc. (BZH:USA) currently trades near recent lows relative to UAFRS-based (Uniform) Earnings, with a 6.8x Uniform P/E, implying bearish expectations for the firm. However, management is confident in their plan options, growth strategy execution, and housing trend improvements

Highlighted Top Ideas AN – AutoNation, Inc., CVI – CVR Energy, Inc., RIG – Transocean Ltd., Other Recent Analyses MGM – MGM Resorts International, WYND – Wyndham Destinations, Inc.

Each week, the Valens Research team highlights our most interesting insights from across our tools and our analysis, including individual company, industry, and macro insights. Top Highlight: Micro Technologies, Inc. Other Highlights: BYND, HCKT, LYFT Other Recent Analyses: AMKR, AMT, BBY, BIIB, CCL, DNR, FORR, LEVI, LLL, MDLZ, NCI, PAYX, PRFT, SBAC, SITE

SiteOne Landscape Supply, Inc. (SITE:USA) currently trades near recent averages relative to UAFRS-based (Uniform) Earnings, with a 22.1x Uniform P/E, implying bearish expectations for the firm. Furthermore, management may be concerned about slowing residential segment growth, macro and weather-related headwinds, and their recent acquisitions

Hilton Worldwide Holdings Inc. (HLT:USA) currently trades above corporate averages relative to UAFRS-based (Uniform) Earnings, with a 25.5x Uniform P/E. At these levels, the market is pricing in bullish expectations for the firm, and management is confident in their book-direct channels, Americas ex-US RevPAR growth, and Hilton Honors’ value proposition

Each week, Valens focuses on several companies that were analyzed in the prior week, where material distortions caused by as-reported GAAP accounting need to be corrected to understand a company’s economic fundamentals.
McKesson Corporation (MCK),USANA Health Sciences, Inc. (USNA),Alexion Pharmaceuticals, Inc. (ALXN)

This week the Valens Research team highlights our most interesting equity insight from across our tools and our analysis. WGO likely to drive strong returns, as current low market expectations do not recognize age-wave and company strategy factors, strong management alignment, and growing management confidence that are likely to justify upside

John Wiley & Sons, Inc. (JW.A:USA) currently trades near recent lows relative to UAFRS-based (Uniform) Earnings, with a 13.4x Uniform P/E. At these levels, the market has bearish expectations for the firm, and management is concerned about their Projekt DEAL publishing agreement, publishing segment revenue declines, university partnerships, and their degree program and subscription services