ABM - Embedded Expectations Analysis - 2018 08 07
ABM Industries Incorporated (ABM:USA) is currently trading near historical highs relative to UAFRS-based (Uniform) Earnings, with a 25.0x Uniform P/E. However, even at these levels, the market has slightly bearish expectations for the firm, and management has concerns about the rising costs of operation due to an extremely tight labor marketSpecifically, management may have concerns about significant labor market headwinds impacting a number of business fronts, particularly in lower wage, non-union geographies, and they may lack confidence in their ability to manage rising costs of operation, specifically due to substantial increases in recruiter hiring. Additionally, management may have concerns that these costs will have a substantial impact on margins, particularly if they are unable to renegotiate better contract terms in the current year. Finally, management may have concerns that strong maintained organic growth will not show up in their financial results, and that their B&I and aviation units will fall short of maintaining guidance
ABM Industries is a provider of integrated facility solutions. The company's segments include: Business and Industry, which encompasses janitorial, facilities engineering, and parking services for commercial real estate properties, sports and entertainment venues, and hospitals and non-acute healthcare facilities; Aviation, which supports airlines and airports with services ranging from parking and janitorial to passenger assistance, catering logistics, air cabin maintenance, and transportation; and Education, which delivers janitorial, custodial, landscaping and grounds, facilities engineering, and parking services for public school districts, private schools, colleges, and universities.
In 2009, just as the dust was settling from the last major equity and credit market crises, we launched a boutique research firm with the intention of breaking Wall Street’s biases and broken incentives:
- GAAP and IFRS have failed to provide rules for reliable financial statement reporting
- Stock analyst recommendations are not grounded in disciplined financial analysis
- Credit agencies have been set up to grossly fail in their responsibilities to investors and the public markets
- Utter lack of willingness of major research firms to employ the the most advanced forensic analysis available
We sought to provide investors and company analysts with a source of information that changed all that.
Many years later, our business model remains because little has changed on Wall Street.
- Corporate credit ratings remain years behind the fundamental underpinnings of company performance
- Stock analysts continue to make recommendations with deeply inherent biases
- Research firms have failed to break down the walls between credit, equity, and macroeconomic research
- The governing accounting bodies have created more leeway for mis-estimates and mis-classifications as financials have become unwieldy and overwhelming
The integrity of Valens Research is founded in our disciplined processes and analytics. No “star” analysts. No corporate advisory relationships. No-nonsense opinions and recommendations.
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