September 21, 2016

Valens Equities Weekly Insights and Inflections for September 21, 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.

Expectations for BLDR to see ROA’ fade once more appear too bearish, as both management and analysts are gaining confidence in the firm’s outlook

bldr-stock-chart

BLDR is trading at a 17.2x V/E’, which is near historical averages. At these valuations, the market is pricing in expectations for a declining ROA’, from 9% in 2015 to 5% in 2020, accompanied by 22% Asset’ growth. However, analysts have bullish expectations relative to the market, projecting ROA’ to improve to 11% in 2017, accompanied by 20%-40% Asset’ growth. Moreover, Valens’ qualitative analysis of the firm’s Q2 2016 earnings call highlights that management is confident about their growth potential and their ability to drive synergies with recent acquisitions. Furthermore, analyst estimates have grown over the last several months, indicating that they are growing more confident about the firm’s outlook. Given growing management and analyst confidence surrounding the BLDR’s fundamentals, current market expectations are too bearish and equity upside 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:
TSE:2914, ABT, AKAM, APA, AVGO, BBY, BDX, BKD, CAT, CHK, CTSH, DB:CON, CXO, DLPH, DLTR, DTE, ECL, FSLR, PSX, TGT, TSX:ENB, ULTA

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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