AYI - Embedded Expectations Analysis - 2020 05 15
Acuity Brands, Inc. (AYI:USA) currently trades at a historical low relative to UAFRS-based (Uniform) earnings, with an 11.1x Uniform P/E, implying bearish expectations for the firm. Meanwhile, management may be concerned about their retail and corporate channel sales, product portfolio, and material costsSpecifically, management may lack confidence in their ability to sustain solid Q1 results and continue to improve their sales channel mix, Contractor Select growth, and net cash flow. In addition, they may have concerns about declines in their corporate accounts channel sales and adjusted operating profit. Furthermore, they may lack confidence in their ability to execute their growth strategy of leveraging their market leadership position with technology-enabled solutions, reduce material costs through engineering efforts, and prune noncore products from their portfolio. Also, they may be overstating the historical strength of their larger commercial project shipments, the strategic significance of their Contractor Select portfolio, and their ability to expand their Lighting Control platform
Acuity Brands is a provider of lighting and building management solutions and services for commercial, institutional, industrial, infrastructure, and residential applications. The company's lighting and building management solutions include devices such as luminaires, lighting controls, controllers for various building systems, power supplies, prismatic skylights, and drivers, as well as integrated systems designed for various indoor and outdoor applications. In addition, the company provides services across applications that primarily relate to monitoring and controlling lighting and building management systems through network technologies and the commissioning of control systems.
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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